Local sweepstakes businesses have been forced to shut down in the wake of a federal deal by which numerous software companies are cutting off their supply to those establishments statewide. Currently, many of the more prominent internet cafes in Sampson County are either revamping, regrouping or have shut down altogether.
In May, U.S. Attorney Thomas G. Walker announced his office had reached agreements with White Sands Technology, LLC, Sierra Software, LLC, TNT Software, LLC, Digital Reveal, LLC, and the principal of Figure 8 Technologies, Inc. stating the U.S. Attorney’s Office for the Eastern District of North Carolina will not prosecute the software companies or their principals, for the use of alleged illegal internet sweepstakes software in internet cafes across the state of North Carolina.
Those pacts were contingent upon their agreement that by July 1, 2015, they will no longer have any involvement with sweepstakes in North Carolina involving an entertaining display. The companies supplied well over 600 internet cafes across the state. It was later announced that the U.S. Attorney’s Office also reached a non-prosecution agreement with HSV Entertainment LLC, agreeing to close its criminal investigation of HSV under the same stipulations.
With that announcement made in May, the sweepstakes businesses were given until the end of June to operate. Many in Sampson stayed open right until the last minute before closing their doors.
By the start of this month, all signage at Top Catz in Autryville had been taken down and the parking lot that has been packed since the business opened was all of a sudden vacant. On Tuesday, several men were cleaning out another former sweepstakes business at 363 North Blvd., Clinton, putting up large placards in the windows and making way for what they said will be a consignment shop. The business has been a sweepstakes operation “for years,” they said.
At H&L Business Centre, several notices were posted on the window stating that the business, closed the night of June 30, would stay closed until further notice. It cited the software ordeal, and the need to upgrade computers and software before reopening the business, located in the Clinton Plaza across from Bessie Burger.
One sign read, “H&L Business Centre will be closing on June 30th, 2015 at 10 p.m. We will be making system upgrades and software changes and will reopen as soon as possible. We apologize for any inconvenience.”
As part of the federal deal, some software companies agreed to not take part in any activities relating to electronic sweepstakes in North Carolina while others agreed they would provide notice to the U.S. Attorney’s Office before taking part in any activities relating to sweepstakes or gambling in North Carolina not covered under the ban.
Sweepstakes is defined to include all games where chance predominates.
N.C General Statute currently prohibits sweepstakes establishments and gaming machines. However, enforcement of the law in individual counties and towns has varied in the wake of judicial discretion that has caused “fuzziness” in the law.
With most sweepstakes operations, patrons buy Internet time that gives them the opportunity to uncover potential cash and prizes with mouse clicks on a computer screen. To play at the cafes, customers get prepaid cards and then go to a computer to play “sweepstakes.” Winners go back to a cashier with their cards and cash out. State law makes it illegal to conduct a sweepstakes through the use of an “entertaining display” to reveal a prize.
Following years of back and forth, a December 2012 Supreme Court decision upheld a ban on video poker. And at the beginning of 2014, N.C. Attorney General Roy Cooper said it was clear sweepstakes cafes are illegal. He said his office was working closely with local law enforcement and prosecutors, providing legal advice and assistance to close the operations.
But sweepstakes owners pushed back, and in some instances where they were arrested and their businesses seized, judges ruled in their favor, making law enforcement leery of pursuing such cases.
“We hope this action will be a big step forward in ensuring compliance with North Carolina’s gambling laws,” Walker said in a prepared statement. “Our office is prepared to assist the state in enforcing large scale violations of the law.”
Investigation was conducted by North Carolina Alcohol Law Enforcement, the Internal Revenue Service, and the Cumberland County Sheriff’s Department in coordination with Assistant U.S. Attorneys David Bragdon and Joshua Royster.
“Alcohol Law Enforcement is proud to have worked with the U.S. Attorney’s Office for the Eastern District of North Carolina in this case,” Mark J. Senter, branch head of N.C. ALE. “Sweepstakes machines have been a source of problems for local law enforcement and the community for years. It is our hope this action eliminates this illegal activity.”
Steps had already been taken locally to curtail such operations.
In October 2014, the Clinton City Council voted to establish a moratorium on new gaming establishments and the very next month the Sampson Board of Commissioners agreed to a similar ban in the unincorporated areas of the county. Roseboro followed suit in January 2015.
While there were believed to be no legally-permitted and operating electronic gaming businesses in Sampson’s unincorporated areas, as of last year there were a total of 66 gaming machines at five local gaming businesses in the Clinton city limits, 57 at two of the sites.
Under the city’s moratorium, those establishments were grandfathered in, however it remains to be seen how the federal deal and the sunset of privilege license fees as of this year will affect those operations in the future.
In Clinton, the five sweepstakes brought in approximately half of the city’s $140,000 in business privilege license revenues in 2014-15. Those funds went by the wayside for 2015-16. The privilege license fees on sweepstakes were previously set at local governments’ discretion and were by far the highest of any such fee in any given municipality. Clinton taxed at $1,000 per machine.
“If the ones still here are able to continue operating,” City manager Shawn Purvis stated previously, “their privilege license (fees) would go away (in 2015-16).”
Local residents are split on the issue of electronic gaming. Many argue gambling operations have adverse effects on communities, while owners and patrons of some mom and pop establishments, who have one or a handful of machines set up discreetly at their businesses, have maintained the machines help supplement revenue and without them they could be forced to close.
One area law enforcement official sided with the former. calling the federal deal a “major milestone in the long and ongoing fight against illegal gambling.”
“In this case, for several years, video poker machines have been masquerading as sweepstakes,” Cumberland County Sheriff Earl R. “Moose” Butler stated. “We hope these agreements will stop and deter evasion of North Carolina’s gambling laws.”
Reach staff writer Chris Berendt at 910-249-4616. Follow the paper on twitter @SampsonInd and like us on Facebook.