Video sweepstakes cafes were so lucrative in North Carolina that the owners paid $10 million over four years to a network of lawyers, lobbyists and consultants working to keep the games from being outlawed.
In return for computer software, provided by a company run by sweeps executive Chase Burns of Oklahoma, the operators paid Burns a percentage of their weekly revenue for legal services, which amount to $45,000 a week.
That glimpse into the sweepstakes industry, which has been fighting attempts by legislators and county sheriffs to shut them down for years, surfaced in a report made public Wednesday detailing the results of the state Board of Election’s two-year investigation into possible campaign finance violations.
The investigation turned up no violations of North Carolina law by Burns. Some board members expressed frustration that more couldn’t be done about what appeared to be the proceeds of illegal gambling used to make donations to more than 90 campaign committees. Investigators found no evidence that campaign contributions came from Burns’ business proceeds; it is illegal in North Carolina for business entities to make the contributions.
The prohibition is on corporate contributions, not on the original source of the corporate money. Elections Director Kim Strach told the board there was no evidence of co-mingled funds, but she could not say with certainty that illegal money had not come to North Carolina through Burn’s trust fund.
“Despite the fact that the funds could have been obtained by illegal means, unless there is evidence that the bank account is a business account or that funds from a business were deposited into the trust account in order to disguise the business as the true contributor, the funds would be permissible campaign contributions,” Strach’s report says.
Board member Maja Kricker, one of two Democrats on the five-member board, questioned whether the business and personal money could really be separated. She said the takeaway from the investigation is that a drug cartel could hire a lobbying firm to advise it on how to make campaign contributions from a personal account without violating campaign finance laws.
Bob Hall, director of Democracy N.C., the group that sparked the investigation, praised the elections staff for its work but said he was dismayed the board didn’t refer the case to a district attorney or federal prosecutors.
“It provides a window into the pay-to-play system of political operators,” Hall said. “There’s a sophisticated effort to turn a criminal enterprise into a legitimate business sanctioned through the political process. Millions of dollars were spent to achieve that goal.”
Investigators interviewed more than 200 people and compiled thousands of pages of records, including bank records that surfaced in a criminal prosecution of Burns in Florida on charges of racketeering and money laundering; he pleaded no contest to lesser charges later. Much of the investigation focused on issues Democracy N.C. raised in a complaint soon after Burns’ arrest, but investigators also followed leads that they discovered and news media reports.
Burns and his wife were thought to be the largest contributors to political campaigns in North Carolina in 2012, spending about $270,000.
But the big money went to the lawyers and lobbyists. Topping the report’s list at $7.8 million was the Winston-Salem firm Grace Tisdale & Clifton where, investigators say, Burns was apparently sending the legal fee surcharges he collected from cafe owners, as well as checks for politicians. The second biggest recipient, at nearly $1.4 million, was the Winston-Salem office of the Kilpatrick Townsend & Stockton law firm, which represented Burn’s IIT in a constitutional challenge to the state’s sweepstakes law that went all the way to the U.S. Supreme Court.
Grace Tisdale forwarded the checks to the Moore & Van Allen law firm in Charlotte, the report says. Gov. Pat McCrory worked at Moore & Van Allen for several years before becoming governor.
Moore & Van Allen, which received about $130,000, according to the report, suggested to Burns which North Carolina politicians should receive donations and how much money to spend on each. A memo included in the report shows legislators were divided into five tiers, ranging from $500 for rank-and-file members opposed to the industry, and increasing for those in key positions all the way up to $25,000 for then-House Speaker Thom Tillis and Senate leader Phil Berger. Other top targets were gubernatorial candidates Pat McCrory and Walter Dalton, as well as Sen. Tom Apodaca and Rep. Ruth Samuelson.
The state elections office also looked into whether lobbyists were “bundling” contributions from multiple sources, which is illegal. The report cited only two instances, both involving Tommy Sevier, a lobbyist with Moore & Van Allen. Sevier said on one occasion he delivered more than one check: It was when Berger was leaving a luncheon meet-and-greet at the firm and someone noticed the senator forgot to take an enevelope of checks.
On the elevator
Sevier, who once worked on Berger’s staff, said he grabbed the envelope and caught up with him just as he was getting on an elevator. Sevier said another time he gave someone from Dalton’s campaign committee more than one check at a fundraising event.
Sevier’s attorney argued to the elections office that he hadn’t broken the law, which at the time prohibited lobbyists from collecting, possessing or delivering contributions, because Sevier hadn’t done all three of those things. Strach said she disagreed. The law has since been changed to prohibit any of those three actions by lobbyists.
In the end, that was the only potential violation identified in the investigation.
Who got what
According to the State Board of Elections report, these were the largest payments from sweepstakes operators for legal and related services to law and lobbying firms.
Grace Tisdale & Clifton -- $7.8 million
Kilpatrick Townsend & Stockton -- $1.4 million
Womble Carlyle -- $419,492
Ashe, Rafuse & Hill -- $276,218
Williams Mullen -- $142,000
Mathis & Murphy -- $133,000
Moore & Van Allen -- $130,000