CHARLESTON, W.Va. -- Lottery Director John Musgrave is evidently taking seriously the allegations of faux fraternal groups operating as Limited Video Lottery retailers.
Musgrave last week sent show-cause letters to four of those LVL retailers, ordering them to appear before the Lottery Commission on Jan. 23 and 24 to explain why the commission should not take punitive action against them.
You may recall that last fall, Jesse Bane and the state Association of Club Owners asked Musgrave to investigate bars around the state that affiliated with obscure fraternal organizations like Order of Orioles or Legion of Guardsmen to operate 10 LVL machines, instead of the maximum of five permitted for bars or clubs.
In November, Musgrave sent a letter to all 170 LVL outlets operating as fraternal or veterans' organizations requesting verification of their status, including IRS approval of tax-exempt status, IRS 990 form, a copy of the fraternal charter, and a list of officers and members, among other information.
The four faux fraternals in question drew the commission's immediate attention because the LVL sites are not located anywhere close to where the fraternal organizations list their lodge locations, Musgrave said.
In one case, the LVL club is 100 miles away from the fraternal lodge's hometown.
Apparently, the owners of the clubs entered into agreements with the fraternal organizations in which they pay for the rights to use the fraternal's name, acting as sort of a "branch" lodge, he said.
That alone raises issues, Musgrave said.
"Any third-party agreement has to be approved by the commission," he said.
If the four LVL retailers in question are found to be in violation of Lottery rules, they could face fines, and have their LVL licenses revoked or reduced from a 10-machine maximum to a five-machine limit.
Musgrave said this is just the beginning of the commission's investigation into possible faux fraternals.
"This is just the start of it," he said. "We think there's quite a few retailers doing the same thing."
Bane, meanwhile, sent along a copy of an IRS audit of a faux fraternal in the Northern Panhandle.