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Statehouse Beat: Lottery Commission juggling ‘faux fraternal’ investigations

Phil Kabler

Given that the Lottery Commission has the unenviable task of both promoting and regulating state-sanctioned gambling, the pending resolution of the faux fraternals saga is going about as well as could be expected.

Of the nine faux fraternals — limited video gaming locations set up and operated by LVL distributors using a name-only affiliation with a fraternal organization in order to have 10 slot machines instead of the maximum five allowed in bars and clubs — that were investigated by the Lottery, four are no longer operating, and commissioners indicated the same fate awaits two others.

Ironically, the two are the ones that launched the whole controversy, when Action Gaming of Wheeling opened two Fraternal Order of Police “lodges” across the street from each other in little New Martinsville in Wetzel County (lodges that are actually based in Marshall and Monongalia-Preston counties).

It’s a little troubling that five of the nine faux fraternals were FOPs. Action Gaming owner David Shriver’s business plan was to recruit FOP officers, offering them turnkey operations including “lodge” locations and staff, along with a 25 percent cut of the profits, minus expenses, in exchange for the use of their lodges’ names. As was testified, because the operating costs came out of the FOP’s share of LVL profits, in many months, the FOPs either made no money or actually owed Action Gaming money.

Additionally, the two main LVL distributors that set up faux fraternals — Action Gaming and Buck’s Inc. in Clarksburg — agreed to pay a total of $250,000 in fines.

Still to be determined is if any of the organizations will lose their tax-exempt status, since the LVL machines in the faux lodges were open to the public, in violation of IRS regulations for non-profit fraternal or veterans’ organizations.

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Meanwhile, monthly Lottery revenues rebounded slightly in July, after falling below the $100 million mark in June for the first time since 2003, but was still down 4 percent from July 2013, and prospects for state gaming didn’t improve with the opening Wednesday of the $440 million Horseshoe Casino in downtown Baltimore.

That’s another blow to the state’s largest casino, Hollywood Casino at Charles Town. In July, Hollywood’s table games took in $7.86 million, about half of what it did in its pre-competition heyday, but was still 1 1/2 times what the other four state casinos took in combined.

Horseshoe, which according to news reports drew 15,000 patrons on its opening day, features $500 maximum bet slot machines for high rollers. Maryland Live! already offers $500 max bet machines with $1 million jackpots.

Hollywood Casino officials have notified the Lottery Commission they are submitting a request to counter with $500 max bet machines of their own. (Approval apparently would be just a technical formality, at which point, the other state casinos would also be eligible to add $500 machines.)

While the Horseshoe and Maryland Live! casinos effectively close off the metro Baltimore market for Charles Town, the $925 million MGM National Harbor will steal Hollywood’s Washington, D.C., and northern Virginia markets when it opens in 2016.

I couldn’t quite visualize the casino’s location, thinking it was in some out-of-the-way location southeast of Washington. Then, earlier this month, I happened to be at the waterfront in Alexandria, Va., and saw the casino site just across the Potomac River. For Hollywood Casino (and for West Virginia Lottery coffers), that location will be devastating.

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Finally, in addition to an endless campaign cycle (whatever happen to the idea of starting general election campaigns on Labor Day?), a new election trend this year is what I would call the “campaign panic email.”

With subject lines such as “Your future is at stake,” “Razor-thin” (lead?), or “I need your help,” the candidates’ emails cite a dire development in the campaign, usually the opposition making a major ad buy or launching a new attack ad.

That’s followed by an urgent call for campaign contributions, with directions to send the funds electronically, so that the candidate can quickly mount a rapid response.

How ubiquitous is it? One lobbyist last week showed me that, as he scrolled through emails on his cellphone, virtually every one was an urgent request from one candidate or another for campaign contributions.

I should have kept that in mind when I got an email last week from one of my bosses with the subject line: “HUGE NEWS (not good).”

Anyone familiar with the current state of the newspaper industry can probably understand why that gave me a jolt. Turns out, it was not an internal memorandum, but a forwarded “campaign panic” email from a congressional candidate.

Reach Phil Kabler at philk@wvgazette.com, 304-348-1220, or follow @PhilKabler on Twitter.


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