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Lottery commission continues fraternal organization investigation

CHARLESTON, W.Va. -- Questioning representatives from two additional fraternal groups, Lottery Commissioners on Thursday continued an ongoing investigation of questionable fraternal organizations operating limited video lottery locations around the state.

That included testimony from Hershel Carter, operator of the Regular Veterans' Post 119 in Huntington, and from officials with the Mercer County Fraternal Order of Police Lodge 80, located in Ellenboro, Ritchie County.

In addition to issues about allowing non-members to play machines at the Huntington club, Lottery officials investigated the Huntington post because the national veteran's organization it is affiliated with has disbanded.

Carter testified the post, which he said has about 50 members, was originally located in Logan County, but he moved it to Huntington to generate more video lottery business.

"I had it for one year in Logan County, and they weren't doing nothing," he said of the LVL machines. "I couldn't pay the light bill."

He said unlike some organizations, he did not have assistance from a LVL machine distributor in selecting or operating the gaming location.

"I never took this post to make a million dollars," Carter testified. "I donate all the money that comes into that post to churches and schools."

Commissioners took no immediate action Thursday.

"This is an ongoing investigation. We are looking at several organizations," said Commission vice chairman Bill Clayton.

Meanwhile, representatives of the Mercer County FOP lodge told commissioners they are exercising an option to be released from the management contract with Action Gaming of Wheeling, and the 10-machine gaming facility operated in their name in Ritchie County will be closed as of today<co Friday>.

They confirmed that Action Gaming had set up a turn-key gaming operation in Ellenboro, about 200 miles north of Mercer County. In January, representatives of the Princeton Fraternal Order of Police testified that the same LVL machine distributor had set up a facility for that FOP in Harrisville, Ritchie County, a "lodge" that the FOP's officers admitted they had never visited.

Officials from both FOPs testified they have been receiving either marginal profits or have had negative revenue months under the arrangement with Action Gaming.

Lottery Director John Musgrave applauded the Mercer County FOP for being honest and forthright during the Lottery investigation and hearing.

Also Thursday, Musgrave said he had not yet read a 30-day notice letter from the West Virginia Amusement and Limited Video Lottery Association regarding their intent to sue over a requirement that they must replace or upgrade thousands of LVL machines by 2017.

International Gaming Technology notified the state in 2012 it would be discontinuing an outdated communications protocol used by older LVL machines in 2015. Musgrave negotiated to extend the deadline to the end of 2017.

"We've bent over backwards to accommodate them," he said.

The notice letter notes that LVL retailers and operators paid nearly $70 million in bidding for 10-year video lottery licenses in 2011, without the knowledge that their machines would become obsolete during the 10-year lifespan of the licenses.

Licensees will either have to upgrade the machines, at an estimated cost of $3,000 per machine, or buy new ones, at a cost of $13,000 or more per machine.

Reach Phil Kabler at philk@wvgazette.com or 304-348-1220.


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