NC sweepstakes parlors banned since 2010, but nearly a dozen remain in Wake

tmcdonald@newsobserver.comMay 9, 2013 

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Wake County District Attorney Colin Willoughby this week said county law enforcement authorities are planning to launch an investigation into a handful of Sweepstakes Internet parlors like this one in Raleigh that should have closed nearly three years ago after the General Assembly outlawed them. However, a Winston-Salem lawyer who represents a New Jersey company that makes the software used by the parlors says the businesses are not violating state law because the software has been updated.

TRAVIS LONG — Staff photo by Travis Long

  • Wake judge: I’m not your man

    An attorney for a company that makes the software used by Internet sweepstakes parlors said a Wake County Superior Court judge has signed off on the legality of the systems. The judge says that’s not true.

    In a letter written in December and posted outside a sweepstakes parlor in Raleigh, attorney John Morrow says Judge Howard Manning indicated that the changes in the software made by his client, VS2, make the sweepstakes machines legal despite the state’s sweepstakes ban.

    “Importantly, Judge Manning made it clear that if law enforcement attempted to shut down cafes operating such a system, he would take the matter up and at that time may issue a restraining order,” Morrow wrote.

    Manning said he was not aware of Morrow’s letter, but he recalls hearing a case presented by lawyers with Morrow’s firm, Womble, Carlyle, Sandridge and Rice, in December 2010 while he was assigned to Person County.

    “They brought in these beautiful, flat-screen TVs,” Manning said. “They argued to me that what I was looking at was not in violation of the law that was just enacted. It looked like a slot machine to me. I might have said something nice. I can’t remember.”

    Manning continued the case and chose not to issue a ruling because a Superior Court judge in Mecklenburg County had already issued an injunction.

    Manning said lawyers with the Winston-Salem law firm came to him again this year asking for a preliminary injunction that would prevent law enforcement officers from shutting down parlors after the N.C. Supreme Court in December upheld the 2010 ban.

    “What they had done was figure out a way to get around the wording of the law,” Manning said. “When they came back to me this year, I sent them a letter that basically said, ‘I’m not interested. It’s not in my district. Get someone else. I’m not your man.’ ”

— It’s been three years and five months since the state General Assembly banned sweepstakes Internet cafes and five months since the state Supreme Court upheld the ban, yet some of the parlors remain open.

A Winston-Salem attorney who represents the New Jersey company that makes the software the parlors use says the businesses are not violating state law because the software has been updated.

John Morrow said the law bans sweepstakes games that use an “entertaining display” to entice customers to play and that the company’s new software doesn’t do that.

“The statute says you can’t use entertaining displays with actual or simulated game play,” Morrow said. “The company, VS2, created a system that has no entertaining displays.”

That argument isn’t flying with local law enforcement agencies in North Carolina, which have been enforcing the ban in fits and starts since the Supreme Court ruling.

Durham County Sheriff’s deputies raided two sweepstakes parlors in the northern part of the county on Thursday, and Wake County District Attorney Colon Willoughby said earlier this week that county law enforcement authorities are planning to launch an investigation into the sweepstakes Internet parlors that remain open in the county.

“I have talked with the Sheriff’s Office, and we believe they are operating illegally,” Willoughby said. “I have asked the sheriff to determine if they are in violation of state law.”

The General Assembly banned sweepstakes Internet parlors effective Dec. 1, 2010. The bill defined “sweepstakes” as “any game, advertising scheme or plan or other promotion” played on an electronic machine with an “entertaining display” that simulates gambling games such as poker, craps, keno or lotto and that award prizes based on chance.

After the Supreme Court upheld the law, some parlors shut down on their own, including two on South Saunders Street south of downtown Raleigh that closed on March 21. But behind those parlors, Total Rewards Sweepstakes is open 24 hours a day at 2608 S. Saunders St., while Paradise Bingo operates just yards away.

It is not clear if the machines at Total Rewards use VS2 software, but they operate much like Morrow described. A customer purchases time at a terminal from a cashier.

When a player logs in, the word “Reveal” appears in the lower right-hand corner along with the number of points allotted to the customers based on how much money they paid.

If players hit the Reveal icon, then a prompt appears asking customers if they want to play a game. If the player chooses to play, then a series of game icons appear on the computer screen with names such as “St. Paddy’s Payday,” “Frozen 7,” and “Pirate Booty.”

Depending on the game, a row of spinning numbers or icons appears, as on a slot machine. It costs 27 points, or about $1.43, for each play. At the game’s end, the player can win anywhere from 15 cents to $2.

Odds attract customers

Phillip Welch ran a sweepstakes parlor, “Lucky Inc.,” in Haw River until March when police arrived and handed him a letter that ordered him to cease operations immediately.

That day, Welch said, he started a new business, “Electronics Plus,” that sells and repairs computers. He thought about waiting to see if a judge would rule that his business was in compliance with state law but opted to instead protect the $25,000 to $30,000 he had spent in equipment that local authorities would have confiscated.

“I don’t have deep pockets,” he said. “It’s not the cash cow like everybody thought it was. What made it so attractive to people around here was the Internet time and the calculated odds of winning. It was so much better here than buying a lottery ticket and not winning anything. Quite a few people would enter the sweepstakes, but they get on Facebook and check their emails, too.”

Welch thinks what attracts people to sweepstakes parlors is small-time recreation, even though some critics describe the establishments as predatory ventures that prey on low-income people.

“It’s not like that,” he said. “Granted, there’s crime in a few places, but I’d say 80 percent or better of the people came here because it was like a community center. For people around here 50 years or older, this was their recreation to come out and socialize.”

Deputies bust stragglers

Many of Durham’s sweepstakes cafes closed after sheriff’s deputies shut down the H&S Internet Cafe on N.C. 98 early last month and seized 108 computers and $2,500 in cash. But at least two remained open until Thursday.

“The process of investigating sweepstakes cafes is no easy task,” Sheriff Mike Andrews said in a statement.

Deputies raided Big Pay Day Sweepstakes on Guess Road and EZ Biz Sweepstakes on 3500 North Roxboro Road and charged the owners, Erik Mac Lohela, 44, and Hoa Thi Lohela, 40, both of Chapel Hill, with “promoting, operating, or conducting a server-based electronic game promotion,” a misdemeanor.

Deputies also cited 11 customers with misdemeanor gambling and seized 70 computers and more than $7,400 in cash.

McDonald: 919-829-4533

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