Internet cafe that raises money for veterans promotes gambling, group says

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Posted: 03/18/2011

By: Scripps Treasure Coast Newspapers

VERO BEACH, Fla. - nonprofit BEACH — A Treasure Coast storefront "Internet cafe" operated by a group that says it is raising money for veterans is nothing more than a location for "convenience gambling," according to a spokesman for the Florida Council on Compulsive Gambling.

Allied Veterans operates Internet cafes at 39 sites around the state, including a location in Vero Beach. Despite the organization donating more than $2.8 million to veteran and other causes, authorities in Pinellas, Jackson, Marion and Seminole counties have sought to shut down its operations and accused the group of illegal gambling.

Two bills pending in the state Legislature also would shut down Allied Veterans in Florida and all forms of electronic sweepstakes game.

But Jerry Bass, national commander of Allied Veterans of the World and Affiliates, Inc., a St. Augustine-based organization, said his group just runs a sweepstakes similar to those run by McDonald's and other businesses in the state.

The Internet cafes sell Internet time to people who come in, Bass said. Customers are given a sweepstakes number. After signing a statement that they understand they are not gambling, they then can check on one of the computer terminals to see if they have won. They can also play games, which can win them cash.

Allied is a 501c19 group, a type of nonrofit organization that's membership must be at least 90 percent veterans or families of veterans. Members of the group can't benefit from it.

Allied is just one organization to offer the electronic sweepstakes game. The Council on Compulsive Gambling estimates there are between 500 and 600 such operations in the state. The centers have mushroomed since Allied opened its sites about five years ago, said State Rep. Scott Plakon, R-Sanford.

Plakon has introduced House Bill 217 to close the loophole in Florida law that allows the cafes to operate, and to put Allied and other organizations out of the sweepstakes business. A hearing on the measure is set for Tuesday in Tallahassee. A companion bill in the senate, SB 576, has not been scheduled for debate.

"My bill is anti-Internet casino gambling," Plakon said. "It deals only with Internet cafe sweepstakes and nothing else. It will not affect McDonald's or any bingo games run by veterans' posts and churches."

Plakon said he and his wife visited an Internet cafe in Seminole County. He said with computers displaying slot machine-style images, it looked like gambling.

"What really alarmed me is that this site had an ATM machine, which would accept the cards the state issues to welfare cases," Plakon said.

Brian Kongvik, spokesman for the Council on Compulsive Gambling, said the storefront Internet cafes and other such operations, are just "convenience gambling." He said the cafes by any name are changing the demographics of gamblers in Florida.

"The operations are in storefront locations where people who might not ordinarily visit a casino, can just walk right in," Kongvik said.

"We are seeing people with the same types of problems we get from the pari-mutual operations, Indian casinos and so on," Kongvik said. "The only difference is those other operations give out our telephone number where any of their clients with problems can call us. Allied does not because they say they are not gambling."

Tim Riney, a Vietnam-era veteran of the 172d Infantry and a customer at Allied Veterans Affiliate #65 in the Majestic Plaza on 14th Place in Vero, said he thinks Allied is a good thing and should not be put out of business.

"(The state is) just like a gangster trying to eliminate competition," he said.

Riney said he frequents the Vero affiliate and has won about $1,000.

"But even if I lose, I win because I see the list of veterans groups they support," he said. "My losses help those groups."

He said he does not think Allied involves gambling, just a sweepstakes that he thinks is more honest then the lottery.

Whatever takes place in Allied's locations, there is apparently big money involved.

Allied's websites claim the group has donated more than $2.5 million to the causes of veterans and first responders in Florida during the last five years.

But the Florida Department of Agriculture and Consumer Services "Gift Giver's Guide" estimates the organization donated only 1 percent of the money it spent in 2009 to such causes.

Finding out how much Allied takes in is difficult.

Allied Veterans files Internal Revenue Service Form 990s and those forms are sent to the state for its review. The Form 990 for 2009, included with Allied's request for a renewal of its registration with the state, showed the organization had a total revenue of $596,696 and expenses of $601,027 for a deficit of $4,331.

A Form 990 is the nonprofit report form equivalent to an individual Form 1040, which residents use to report all income and expenses.

Asked about the small amount of money on the 990 compared with more than $1 million donated in the fall of 2010, Bass said there were other 990s that

had not been reviewed. He said one form was filed for each of the affiliates, but Liz Compton of the Florida Department of Agriculture's Consumer Services Division, said only one Allied 990 is on file in Tallahassee.

In January, the Seminole County Commission had a hearing to discuss an ordinance banning Internet cafes or electronic sweepstakes in that county. The city of Longwood in Seminole County had already forced the closure of an Allied Veterans operation. During the hearing, two representatives of Allied, Kelly Mathis, attorney and registered agent for the organization, and Lee Black, manager of the Internet operation in Apopka, spoke.

Mathis told the Seminole board he did not know how much money Allied brought in each year. He said he thought it was probably a couple of million dollars. Black told the board his storefront brought in $100,000 a week.

After the board unanimously adopted the ban, Allied went to federal court and obtained a temporary injunction preventing the county from enforcing the ordinance until a full hearing can be held.

In 2008 and 2009, law enforcement agencies shut down Allied Internet sites in Pinellas and Jackson counties, and warned one in Marion County about illegal gambling. Allied went into the Second District Circuit Court in Leon County seeking relief from the enforcement. Allied appealed the district court ruling and the First District Court of Appeal said Allied would have to file suit in each of the 67 counties to stop law enforcement operations from shutting the Internet cafes down.

None of the lawsuits indicate how much money Allied takes in at each site or as a whole.

When Bass, who makes $165,000 according to the 2009 IRS Form 990, was asked in an interview how much money Allied receives each year from its affiliates, he said he did not know.

"That is something for the accountants," he said. "I just handle the legislation and administrative issues."Asked if $100,000 a week was the normal revenue, he said the Apopka site was one of the two top sales sites in the state. He declined to give specific sums, saying they were "proprietary" in nature.

"This is not proprietary information," said Daniel Borochof, founder and president of the American Institute of Philanthropy in Chicago. AIP is a charity watchdog group. "This is basic information that they are supposed to report on their form 990s."

"Being a nonprofit charity, you would think they would want to be more transparent," said Bennett Weiner, chief operating officer of the Better Business Bureau's Wise Giving Alliance. Weiner's organization watches over charities operating in the United States.

Plakon said the lack of transparency is one of the issues that prompted his bill.

"Internet cafes and other similar operations are a multimillion-dollar industry in Florida, and they are virtually unregulated," Plakon said.

Bass said he is in favor of regulation if it is in the form adopted by the Duval County Commission. The Duval ordinance sets out license fees per Internet site, plus a fee per operating computer, establishes zoning requirements and restricts admission to persons 18 years of age or older.

"They were going to abolish us," he said. "We hired a former mayor and he went in there and showed how it should be done."

How Allied Vets is organized

Allied Veterans of the World and Affiliates, Inc., is a 501c19 organization, which means most of its membership must be veterans or veteran-related, and no part of the money raised can be used to the benefit of any member or shareholder. It is based in St. Augustine and has branches or affiliates scattered throughout Florida from Jacksonville to Naples.

The organization conducts an electronic sweepstakes through sales of Internet time to clients of its affiliates.

Jerry Bass, national commander, said the operation is like the sweepstakes conducted by McDonald's. But the similarity ends there, while McDonald's Restaurants are franchise operations, Bass said all of the affiliates are owned by the parent company which lists St. Augustine as its Florida headquarters.

Allied Veterans of the World and Affiliates is not confined to Florida. It also operates in North and South Carolina and Arkansas.