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Owners of dozens of Internet gambling centers in Florida were arrested Wednesday as part of a three-year investigation into Jacksonville-based Allied Veterans of the World, a purported charity group that, authorities say, collected millions of dollars for itself and little money for veterans.

The probe led to the arrest of 55 individuals in Florida and five other states and prompted the resignation of Lt. Gov. Jennifer Carroll. Two suspects remained at large Wednesday.

It is the “first wave” of Operation Reveal the Deal, which targets illicit slot machine operators who exploited a loophole in the state’s sweepstakes laws, Gerald Bailey, commissioner of the Florida Department of Law Enforcement said at a news conference in Orlando.

Targeted in the crackdown were owners and operators of 49 gambling centers affiliated with Allied Veterans of the World, an organization registered as a charity but which gave only 2 percent of its profits over three years to charitable causes. None were in Broward or Miami-Dade counties; three were in Monroe. Carroll’s consulting company had represented Allied Veterans until she became lieutenant governor in 2011. Police would not say whether Carroll received payments from the group while serving lieutenant governor.

“Their premise of charity is a lie — a lie to our citizens and a lie to our veterans,” Bailey said. “Our investigators believe that the reality is that each gambling center is operated by the owners of for-profit agencies that funnel the bulk of the money back to themselves.”

He said charges would be forthcoming next week against those in custody on suspicion of illegal gambling, racketeering and money laundering. He emphasized that there would be additional probes into other Internet cafes not affiliated with Allied Veterans.

The games operate by giving customers a prepaid card to play a “sweepstakes” game on a computer that offers a game with the look and feel of a slot machine. Winners of games with names such as “Captain Cash,” “Lucky Shamrocks” and “Money Bunny” rack up winnings and then go to a cashier to cash out their winnings.

Seminole County Sheriff Donald Eslinger, who launched the investigations that sparked the dragnet, said the operations of other gaming centers are believed to be “contrary to the law” but police “have delayed the pursuit of criminal charges against them so as not to jeopardize this investigation.”

Asked whether any other elected officials would be implicated in the probe, Bailey said: “That is one of the issues that is going to be taken up in the second wave of the operation.”

Meanwhile, the investigations prompted Senate President Don Gaetz, R-Niceville, and Gaming Committee Chairman Garrett Richter, R-Naples, to introduce legislation next Monday that would ban Internet cafes in Florida. The Florida House last year passed legislation that would ban the gaming centers, but the Senate, concerned about the impact on jobs, refused to go along.

Richter said the Senate leadership had been supportive of imposing a moratorium opening new Internet cafes until the Legislature took a comprehensive look at gambling laws next year. But the revelations this week, he said, have “expedited the thinking going forward.”

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RANCHO CORDOVA, Calif. (AP) — Rancho Cordova city officials have approved a moratorium on new businesses that they say are casinos disguised as Internet cafes.

The Sacramento Bee reports the City Council recently passed the 45-day moratorium to prevent similar operations from opening their doors. The moratorium will give city officials time to explore an ordinance to ban the businesses outright.

State officials say the cafes have computers that run casino games. Customers buy a card to play the games and can cash out the winnings at the store.

The Justice Department has issued an advisory calling the businesses illegal gambling operations, but enforcement often falls under the jurisdiction of local governments.

Operators and their vendors contend the businesses are legitimate and operate within the confines of the law.

Copyright 2013 The Associated Press.

 Rancho Cordova Seeks To Stop Internet Cafe Casinos

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As if opponents of Ohio’s seedy network of 800 Internet cafes did not already have enough ammunition in their arsenals to fire at state legislators, along comes an investigation that should seal the deal of doom on these unconstitutional sweepstakes parlors.

An Ohio newspaper probe revealed last week that most Ohio Internet cafes provided incomplete information to the state secretary of state’s office, and many of the businesses’ operators who could be identified have spotty financial backgrounds or criminal histories.

Now that regulations that some say would force Internet cafes out of business are likely for a vote in the Ohio House as early as this week, the new revelations should spur legislators to act quickly and decisively in support of House Bill 7. The bill, sponsored by Rep. Matt Huffman, a Lima Republican, would limit prize payouts at the sweepstakes parlors to $10 a day, a provision essentially intended to drive them out of business.


A moratorium on new Internet cafes in Ohio expires June 30. Therefore it’s incumbent on the General Assembly to act expeditiously. Just in case anyone has forgotten, numerous other logical reasons explain why such extreme regulation is needed and needed now:

Internet cafes lack all consumer protections that regulated gambling offers. Cafe owners and employees are not subject to background checks, games aren’t checked for integrity and fairness, and there are no gaming taxes .

Internet cafes divert money from churches and fraternal organizations that operate bingo and other forms of legal gambling. These groups are strictly regulated and are required to give part of their proceeds to charity.

The operation of Internet cafes violates the Ohio Constitution, which specifically prohibits gambling except for those that are state-regulated, such as the Ohio Lottery, casinos and racinos.

Ohio Attorney General Mike DeWine, a longtime foe of storefront gambling, likens Internet cafe shenanigans to “The Wild, Wild West.” The Ohio General Assembly can best tame this out-of-control beast that preys on the poorest of Ohio’s population by adopting Huffman’s responsible legislation by the Easter recess.

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An Internet business cafe has been shut down by Matthews police after authorities said they determined it was not complying with state sweepstakes gaming laws.

Matthews police say officers seized computer equipment last Thursday from Cyber One, a business in the 11200 block of East Independence Boulevard, near Interstate 485.

Corp. Lori Valdes, a spokeswoman for Matthews police, said authorities gave written notification in early February to Cyber One’s owners that the business would need to change its gaming software in order to comply with state laws. Valdes said Cyber One closed for a short time after that.

When the business re-opened later in February, Matthews police executed a search warrant last week. Valdes said police closed the business, claiming it was violating North Carolina sweepstakes laws.

She said the investigation is continuing into Cyber One’s operations, and criminal charges are possible.

A number of Internet operations in the Charlotte region closed earlier this year after new state laws limiting sweepstakes operations went into effect.

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internet cafes.jpg Customers were able to choose among several dozen sweepstakes games in September at the Infinity Cafe.  

COLUMBUS, Ohio - More than 30 witnesses lined up to testify Tuesday before a committee considering House Bill 7, which would force most of Ohio's 800 or so Internet cafes to shut down.

In the legislation's third hearing, opponents responded to allegations from Ohio Attorney General Mike DeWine and law-enforcement agencies that sweepstakes parlors are fronts for criminal activity, including money laundering and human trafficking.

Luther Liggett, an attorney representing a coalition of cafe owners and operators, told the committee the bill is unconstitutional and part of a smear campaign fueled by big-game operations, such as casinos, to snuff out the sweepstakes industry.

"It has nothing to do with prostitution or anything like that," Liggett said. "It's about putting the competition out of business."

He said the bill's passage would be no different than lawmakers outlawing laundromats because they compete with washer-and-dryer retailers.

The sweepstakes business has had a target on its back since June 2012, with opponents asserting the parlors are fronts for illegal gambling that drain money from charitable organizations and casinos. Internet cafes sell Internet and phone time with cash-prize contests thrown in as a bonus.

With little statewide regulation, some have said cafes have the potential to foster serious crimes. Lawmakers shelved a similar bill last year after it passed the House.

A representative of the Portage County Tea Party told the committee HB 7 undermines capitalism and needlessly sacks Ohio jobs. Tom Zawitowski, the group's executive director, said his organization opposed casino expansion, but Internet cafes have had a positive effect on communities and promote prosperity in hard economic times.

"We are not gambling proponents," Zawitowski told the committee. "However, when we looked at this issue, it just seemed to us that the law said sweepstakes are legal."

Liggett said state lawmakers already put a moratorium on sweepstakes cafes last year, meaning no new parlors can plant roots in Ohio until June 30, 2013. That same law defines sweepstakes as separate from gambling, and legislators are violating the statute by playing favorites with what businesses can and cannot participate in cash-prize contests, he said.

"It legalized gambling at every bar in Ohio. All you had to do was give a cut to a charity," he said. "So this business about legalizing gambling on every street corner. Come on, that race horse is out of the barn."

Rep. Matt Huffman, a Lima Republican sponsoring the bill, said Internet cafes differ from typical sweepstakes games because they're year-round businesses. Contests like those offered by McDonald's and Verizon Wireless are marketing gimmicks with an expiration date. Plus, he said, nobody binge-buys hamburgers just for the possibility of a prize.

Liggett, who was reprimanded by the committee for his tone, disagreed, saying people do, in fact, buy McDonald's food just for that reason. In addition, Publisher's Clearing House is a year-round sweepstakes industry, he said.

Dozens more cafe owners, operators and employees were scheduled to testify to the House committee. Marvin Carroll, manager of Buckeye Internet Cafe, tearfully told the committee it had no proof of wrongdoing and begged it to regulate his industry.

"Regulate us and get your answers," he said. "Do not take our jobs. Do not take my life . . . Do not take my life as I know it."

Carroll added there are bad people in every profession, but it is unfair to judge him based on others' crimes or government officials' "guesswork and opinions."

The overflow crowd loudly applauded Carroll, leading to a warning from the committee that those who exhibited raucous behavior would be thrown out.

Jim Del Torto, owner of Game On Business and Sweepstakes Center in Twinsburg, said his cafe is not a den of criminal activity, and it offends him that his family-friendly business is frequently portrayed in such a light.

"We have created an atmosphere … that is safe, welcoming and family-like," he said.

Liggett testified that politics has fueled testimony from police and other prominent officials.

He said he welcomes the punishment of sex trafficking, racketeering, money laundering and illegal gambling and the closure of cafes not registered with the Attorney General's Office -- but lawmakers have to prove their claims first.

"Why don't you go arrest them?" he said. "If they're so confident criminal activity is going on, why aren't they out there doing their duty? The fact is there isn't any criminal activity going on."

Rex Santus is a Kent State University journalism student and a fellow in The E.W. Scripps School of Journalism Statehouse News Bureau at Ohio University.

RANCHO CORDOVA (CBS13) - Game over for Internet cafes? One city is considering cracking down on the cafes over worries they’re being used for illegal Internet gambling.

City leaders have scheduled an urgent vote Monday to ban all Internet cafes in the city of Rancho Cordova in an effort to fight crime before it happens.

Police raided an Internet cafe in south Sacramento for illegal online gambling recently. It’s something the city of Rancho Cordova is trying to avoid.

“If it brings trouble then kick them out, but if there is no valid reason to ban them, then there is no reason to ban them,” said Rancho Cordova resident Harold Lind.

The city is scheduled to vote tomorrow night to temporarily pull the plug on the cafes because some are concerned these businesses are bad for the neighborhood and are a hot spot for crime.

“What these establishments usually bring in is a lot of drugs, prostitution and a lot of problems and complaints from other business owners and residents,” said Sacramento County Sheriff’s Department Sgt. Ray Duncan.

There are currently no Internet cafes in city limits; however, one cafe has applied for a business permit, which city officials say is prompting the review.

“Business is business; everybody has to work,” said Lind.

But one attorney who represents Internet cafes says Internet cafes are no different than a sweepstakes at McDonald’s.

It’s really hard to discern under the law — under anybody’s interpretation of the current laws of California or other states whether this is gambling or not,” said attorney Mark Reichel.

“I think there are legitimate reasons to be at an Internet cafe,” said resident Herbert Lum.

People who live in Rancho Cordova are on both sides of the fence.

“There are other places that offer free wifi,” said resident Alex Slaughter.

“A lot of people check their email, send business correspondence — those people are gonna have to pay the price for every other illegal activity that goes on there,” said Lum.

If passed, the moratorium will last 45 days while the city studies whether to permanently ban Internet cafes all together.

Several east bay cities, including Antioch and Pittsburg, have already set similar moratoriums.

 Citing Crime Reports, City Of Rancho Cordova Considers Banning Internet Cafes

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internet-cafe.jpg View full size Jean Pastovic, left, and Kathy Hancy, center, play sweepstakes games at Infinity Cafe in Westlake.   Statehouse Republicans historically don't like gambling. So it's puzzling that state Senate Republicans refused before Christmas to approve an overdue House bill that would effectively shut down Internet cafe gambling. Puzzling, but not inexplicable: The issue has attracted a small army of lobbyists.

As many as 800 Internet cafes pock Ohio, The Plain Dealer's Thomas Ott has reported. Only Florida may have more. Yet they're unregulated because Ohio law is silent on the subject. What's more, the profits cafes rack up don't benefit schools (as does the lottery) or localities (as do casinos).

Last fall, the Republican-led Ohio House passed a strong anti-Internet cafe bill by a 63-30 vote. Republican Attorney General Mike DeWine was among backers of the bill, sponsored by the House's No. 2 Republican, Rep. Matt Huffman of Lima.

But the GOP-led Senate wouldn't act, which killed Huffman's bill when the 2011-12 General Assembly expired Dec. 31. Procedurally, that sent Huffman back to Square One.

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Huffman has fine-tuned and reintroduced the bill. He hopes the House will pass it before an Easter recess and send it to the Senate.

Ohio GOP legislators are generally anti-gambling. The Ohio Lottery amendment to Ohio's constitution reached the ballot in 1973 (when voters ratified it) with backing from only nine of 20 Republicans then in Ohio's Senate and 22 of 54 House Republicans.

Over the last 20 years, Republican legislators repeatedly balked at casino gambling -- before voters approved it.

So why was the GOP-controlled state Senate the impediment last year?

Lobbyists may hold the answer.

Ott has reported that more than 50 entities are lobbying for or against the Internet cafe bill. True, charities -- and Ohio's four casinos -- don't like competition. But this isn't merely another bout between rival businesses. The state constitution authorizes charitable gaming and casinos, and Ohio polices both. The law is silent about Internet cafes, making it impossible to police them or (in contrast to casinos) even know who their investors are. Huffman's bill solves the problem. Senators, come spring, must pass it.

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Internet Café, the name doesn’t even begin to describe what they’re all about.

They sell internet time to customers who then use their computers to play games that look an awful log like slot machines.

Opponents of internet cafes say they’re simply renegade casinos, unregulated and preying on the poor.

Supporters call them small businesses that have created more than 10,000 Florida jobs. To the state legislature they’re simply a headache.

Last year the House moved to ban internet cafes.

“These are truly the crack cocaine of gaming,” said Rep. Scott Plakon.

The effort was spearheaded by Representative Scott Plakon but the Senate never took up the bill and Plakon lost reelection.

The issue of internet cafes looked dead this year. A Senate Committee on gaming decided to cancel meetings before a bill could be drafted and all gaming legislation was put on hold while lawmakers gathered more data.

With no legislation in site State Senator John Thrasher stepped in with a bill to stop the expansion of the cafes.

“These things are unregulated. They are causing some issues around the state, let’s take a stop, stop right now,” said Rep. Thrasher.

The bill keeps any new internet cafes from opening for two years and allows the ones in business now to keep the games going.

An investigation is underway to find out how a gaming expansion in Florida would impact tourism and other established Florida industries. The study will be used in the creation of legislation for the 2014 legislative session.

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Updated: Monday, February 25 2013, 10:59 PM EST
COLUMBUS -- Ohio's Attorney General, Mike DeWine releases new undercover video of some of Ohio's "Internet Cafes," claiming what they're doing now is illegal.

The subject has gone through the Statehouse the past two years. Last year, a bill that would effectively bankrupt these possible illegal gambling spots floated through session then tossed away because of time concerns.

This year, House Bill 7 would ban these businesses if lawmakers approve it and the Governor signs it.

"We want to crack down on these elements before they become a real problem in Ohio," Sandy Theis said.

Theis is with a group called Citizens Against Gambling Expansion, backing House Bill 7 and strict regulation of Internet Cafes.

According to DeWine and Theis, the presence of slot machines or programs similar to slot machines make Internet Cafes illegal now, even before any bill is passed into law.

"They look like slot machines, they sound like slot machines and they pay out like slot machines," Theis said. "If they're slot machines, they're not legally allowed to be in those places."

So why aren't those places getting busted?

DeWine says they will in due time.

"I'd like to see what the state legislature is going to do," DeWine said. "It will be a lot clearer with a decision from them."

Reporter: Shawn Kline
Attorney General: "Undercover Video Shows Internet Cafe's Are Breaking Laws."

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LIBERTY - A Warren woman was one of two employees of an Internet cafe on Belmont Avenue arrested Friday morning during a raid at the establishment.

Police said as of Friday afternoon they were still trying to locate the business owner, who was not named. The business, Belmont Sweeps, 3103 Belmont Ave., was ordered closed.

Amber Almhaiat, 27, of Warren, and Patricia Micochero, 45, of Tallmadge in Summit County, each were charged with operating a gambling house, a misdemeanor. They each were released on their own recognizance and likely will be scheduled to appear in court next week.

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The Belmont Sweeps on Belmont Avenue in Tribune Chronicle / Joe Gorman
Liberty was raided by police Friday. Two employees were arrested on misdemeanor charges and released until they appear in court next week.

Liberty police Chief Richard Tisone said the raid came after a two-week investigation into illegal gambling activities at the establishment.

He said a warrant, secured from Girard Municipal Court, was served on the business about 10:20 a.m. He said officers removed 33 suspected gambling machines, an unspecified amount of cash, various documents and weapons.

Tisone said that during their investigation, undercover detectives gathered evidence that gambling was occurring at the business.

"A lot of it was based on their observations and information they collected," Tisone said, noting the Trumbull County Prosecutor's Office and Girard Municipal Court assisted with the investigation.

Belmont Sweepstakes is one of five Internet cafes in Liberty, and Tisone said he believes it has been operating at least a year.

He said the charges that could be filed against the business owner may be contingent on whether he has a prior conviction.

In a typical Internet cafe, customers pay for Internet time with phone cards and use them to bet points on computers loaded with games. Winners can get cash or merchandise prizes, such as canned coffee or car wax.

Some sites also offer services, including regular Internet service, food and drinks.

The difference between illegal establishments and legal ones, prosecutors say, is the amount of cash prizes a customer can win from playing the "sweepstakes" games offered by the businesses and if the games they provide are games of chance, rather than skill-based games.

Prior to Friday's raid, the latest count by the state showed 821 cafes in Ohio. In Trumbull County, there were 47 and in Mahoning County, 37.