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Why has staid Virginia deregulated some forms of gambling?

Money for Nothing

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Legal gambling has always been tightly regulated by state authorities in Virginia. Now, for at least one type of gambling, it may be anything goes.

In the past few months, state agencies have lifted a number of rules regulating one form of gambling: pull-tabs, gambling cards akin to scratch tickets. The state Attorney General's Office recently ruled that pull-tab gambling operations no longer need to get licenses to operate. That comes atop a decision that bans the state Charitable Gaming Commission from running background checks on pull-tab gaming operators.

Some critics of the moves say the industry is headed into an era of Wild West wagering, with few rules and no oversight.

Stanley Lapekas, executive secretary of the Gaming Commission, is concerned that some gaming operations won't follow the law because an important penalty has been removed.

"The big hammer is that if a person violates a law we could revoke the permit," Lapekas says. "They've taken that away. There's absolutely no oversight."

While Lapekas acknowledges that his organization can make inspections, he says there are no legal repercussions for violators, and hence no incentive for charitable gaming operations to play by the rules.

"This is the first state that I know of that has unregulated gambling," Lapekas says.

Charitable gaming operations, though, tend to support the changes. Wes Crowder, state secretary of the Loyal Order of the Moose, believes the changes will make it easier for fraternal organizations to raise money for building improvements.

"I think it's a good development," Crowder says. "It will be good for fraternals and military organizations if they handle it right."

Crowder says he has complete confidence that Moose Lodges will play by the rules.

"We want our people to comply with the law," Crowder says. "We are also instructing them to give a certain percentage [of pull-tab dollars] to charity."

Eddie Dentz, judge advocate for the Virginia American Legion, also says he's certain that his organization will run a tight ship. But he does see the potential for trouble. While the Gaming Commission can't punish a fraternal or veterans group, some organizations could end up with tax problems.

"If you sell pull-tabs to people who are not members of your organization you are liable for unrelated business income," Dentz says. "[Organizations] better be careful that those who buy pull-tabs are members."

In March, Gov. Jim Gilmore vetoed the bill to deregulate pull-tab gambling, SB 1177. The governor argued that the new law would remove safeguards against theft and mismanagement of funds. In addition, the governor wrote, exempting pull-tab gambling from the rules requiring a percentage of gambling proceeds to go to charity would suck $9 million a year from its intended charitable purposes. The General Assembly, however, overrode his veto by a wide margin.

The lack of oversight could have dire consequences for an industry that has often been linked to criminal organizations, according to Lapekas.

Most organizations that use gambling to generate charity funds run clean operations. But in the early 1990s a wave of scandals broke over bingo halls and lodges. In Henrico County, among other places, some of the halls engaging in charitable gaming weren't actually giving money to charity. Some people running the games were convicted of embezzlement.

That's when the state stepped in. In 1996 the Charitable Gaming Commission gained the power to regulate the games.

"Organized crime has always preyed upon gambling," Lapekas says. "It's an industry that attracts unscrupulous individuals. That's why every state that has gambling has a gambling commission."

Sen. H. Russell Potts (R-Winchester), who as the patron of SB 1177 put the changes in gambling in motion, snorts at Lapekas' views. Singling out gambling for potential criminal involvement is unfair, Potts says.

"That's a bunch of garbage," Potts says. "Organized crime could get involved in a number of things. "My side won and the other side lost. My opponents will have another opportunity next year to throw out my bill."

But repealing SB 1177 doesn't seem likely because the commonwealth is moving in a gambling-friendly direction, according to Potts.

"[The General Assembly] overrode the veto overwhelmingly," Potts says. "There must be a tremendous groundswell of support for the legislation."

Still to come: high-tech pull-tab machines, devices that look like Vegas slot machines. Players push a button, see numbers spin on the screen and receive a pull-tab. Lapekas says these devices could be a cash cow because they are a far more attractive lure for gamblers.

"Electronic devices have been magnets for organized crime and white collar crime," Lapekas says. "These machines need to be monitored."

Virginians might also want to consider the impact the decision could have on state-run gaming, according to Lapekas. Now that charitable gaming operations don't have to include their pull-tab dollars in their gross it will allow them to offer higher and more frequent pots.

"Every dollar sold in the social quarters competes with the [state] lottery," Lapekas says.

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