Video poker industry headed toward slow fold

They looked as harmless as a Pac-Man video game when they popped up years ago in mom-and-pop convenience stores, bars and bowling alleys across North Carolina. But video poker machines proved to be a far greater adversary to the police and lawmakers who saw them as a scourge on society.

By law, the machines could offer only $10 in merchandise as prizes. But the machines were often rigged to tempt players with big cash payouts so that operators could rake in bigger profits.

An industry flush with money spent some of it in campaign contributions to politicians who had the clout to keep video poker legal.

It won't be legal much longer. The state Senate voted 44-1 Monday night to phase out video poker in North Carolina by July 1, 2007. The House passed the bill last week, so all that's left to shut down the industry is Gov. Mike Easley's signature. A spokeswoman said he supports the bill.

Sen. Charlie Albertson, a Duplin County Democrat who was the most ardent supporter of a ban, thanked senators for not giving up on efforts to outlaw the industry.

"I do believe our state will be a better place because of this," he said.

The phaseout is a relief to state, local and federal officials who have been breaking up illegal video poker operations for years.

"The prospect of a state government stepping up and essentially writing out an industry that is facilitating any type of criminal activity is wonderful news to the FBI," said Special Agent Greg Baker, who supervises criminal investigations in the Raleigh FBI office. "We have a lot to do and few people to do it."

Since 1999, the FBI and the state Division of Alcohol Law Enforcement have arrested about 30 people, seized 700 video poker machines and recovered $10 million in cash and assets related to illegal gambling activity. Sheriffs have shut down operators, too.

Mike Robertson, the ALE's director, said his agents have chased illegal operators who have set up machines in private homes, nail salons, even delivery trucks that hop the South Carolina border.

"They are a pain," he said.

Despite such high-profile arrests as former state Transportation Secretary Garland Garrett Jr., the industry resisted efforts to shut it down. Bans passed the Senate nearly every year, only to die in the House when Speaker Jim Black refused to go along. Black said the industry and the 3,500 jobs it created shouldn't be shut down over a few bad apples.

Black, a Mecklenburg County Democrat, has been a leading recipient of campaign money from the video poker industry.

He changed his position on a ban last month, after hearings by the state elections board prompted a state criminal investigation into those contributions.

Though board members did not accuse Black of wrongdoing, they saw evidence that some contributions to his campaign were by someone in the industry other than the named donor, and of thousands of dollars in illegal cash contributions going to the industry's state political action committee. State law limits cash donations to no more than $100 because they are hard to trace.

Board members expressed disbelief when a woman on disability, making $1,105 a month, testified that she gave Black a $1,000 contribution. She regularly played video poker in a Richmond County convenience store.

Black steered some of the video poker-related contributions to Rep. Michael Decker, whose switch to the Democratic Party in 2003 helped Black hold on to the speaker's post.

Black said the hearings, and the related investigations into the industry, did not influence his support for a phaseout. He said the new state lottery gives some of those in the video poker business a new source of opportunity.

The phaseout is a compromise for video poker operators and law enforcement. Legal operators say the phaseout is an overreaction to the illegal doings of a few, but at least it gives them time to cut their losses. Robertson and other law enforcement officials say they would like the ban to start immediately.

Robertson predicts the next year will prove to be a bustling time for his agents, as illegal operators try to milk money from their machines before removing them. They will have to remove a third of them by Oct. 1, another third by March 1, 2007, and the rest by July 1, 2007.

Richard Frye, who operates a video poker business in Moore County, says the machines will be back when the public gets bored with the lottery.

"It reaches its maximum income, and then they have to introduce something new to help the lottery along," said Frye, who sits on the industry's state association. "And it's going to be video poker."