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Michigan Sweepstakes Cafes Will Take It To Court

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GENESEE COUNTY, MI – Cease and desist letters have been issued to  nine additional Internet Sweepstakes cafe — including two locations in Genesee County — from state Attorney General Bill Schuette.

The local businesses include East Point Business Center & Internet Cafe, 3097 Genesee Road, in Genesee Township and West Point Business Center & Internet Cafe, 1493 S. Linden Road, according to a news release issued Tuesday.

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“Citizens should steer clear of Internet Sweepstakes Cafes that are nothing more than unregistered, illegal casinos,” said Schuette in the release.

“The letters come as the result of an ongoing investigation by the Michigan State Police, the Michigan Gaming Control Board and the Attorney General’s office,” the release further states. “Last month, Schuette’s office announced it has already closed eight such operations after coming to an agreement with a gaming software provider.”

Wording in the letters states anyone found guilty of operating an unlicensed gambling operation may face 10 years in prison, a $100,000 fine or both, and the businesses have 14 days upon receipt of the letters issued June 8 to cease the alleged gambling operations.

similar letter was issued in April to the Flint Business Center on Fenton Road, which has since closed its doors, along with seven others across the state after officials reached an agreement with Innovative Entertainmen to voluntarily close eight locations.

The legality of the businesses has been questioned by some local authorities, with several of the facilities offering internet access and sweepstakes opportunities having opened in Genesee County.

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Battle over Internet sweepstakes cafes’ legality still being waged

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LANSING, MI — Michigan Attorney General Bill Schuette ordered nine more Internet sweepstakes cafes to halt operations as he continues to crack down on what he calls “illegal casinos.”

Schuette sent cease and desist letters to the cafes on Friday, warning the operators of potential prosecution. The letters came about a month after Schuette reached an agreement with eight other sweepstakes cafes to shut down.

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But one of those cafes, the Flint Business Center, filed a suit against Schuette on Thursday and requested a preliminary injunction to prevent the state from prosecuting the cafe or seizing its assets.

“We’re confident we’ll prevail in court,” said Schuette’s spokeswoman Joy Yearout. “Michigan law does not authorize unregulated pop-up casinos to provide online gaming.”

Several cafe owners could not be reached for comment. Flint Business Cafe’s attorneys would not comment.

Internet sweepstakes cafes sell Internet access or long-distance phone cards. With each purchase, a customer receives free sweepstakes entries to play casino-style computer games for cash prizes. Some cafes serve snacks, like pop and chips.

Cafe owners liken their operation to McDonald’s Monopoly game, where customers buy a hamburger or French fries and receive pull-tab game pieces with the chance to win cash and other prizes.

Michigan law prohibits gambling that contains elements of consideration, prize and chance, unless specifically authorized by statute. Operating an unlicensed gambling operation is a felony punishable by up to 10 years in prison and/or a fine of up to $100,000.

Cafe owners say they offer prizes, but not consideration or chance. Consideration means the player has to spend money or considerable effort to participate, while chance means the outcome is beyond the player’s control.

The Flint Business Center argues in its lawsuit that there’s no consideration since sweepstakes entries are offered for free with purchase or a limited amount are given for free at request. The cafe also contends there is no element of chance, since sweepstakes entries have predetermined prize values.

“AN ARGUMENT THATS BEEN WON FROM COAST TO COAST” said Casey Rooks from BetitAintGambling.com

“The graphical interface displayed by the computer terminal is merely a simulation that reveals the predetermined prize value of the points in a fanciful manner,” according to the lawsuit.

The state argues that sweepstakes cafes are illegal for essentially selling access to the game through the sale of Internet access. State law allows a limited exception for promotions, like McDonald’s Monopoly game, that are occasional and ancillary to the primary business.

“These establishments may be run under the false premise they are conducting legal promotional sweepstakes. But, there is no such exception for this type of gaming under Michigan law,” according to an informational guide on sweepstakes cafes from the Michigan Gaming Control Board.

Michigan courts may use a broad interpretation of the law and deem an operation illegal even if it does not have all three elements of prize, chance and consideration.

Genesee County Circuit Judge Judith Fullerton will conduct a hearing on Flint Business Center’s motion on June 18.

The following locations received cease and desist letters last week:
Treasure Island, 5310 Ivan, Lansing
Players Club Internet Café, 13404 East 11 Mile Road, Warren
Super Café Internet Café, 27258 Eureka Road, Taylor
Players Club Pontiac Internet Café, 775 Baldwin Rd., #A, Pontiac
Treasure Internet Lounge, 39109 Garfield Road, Clinton Township
Treasure One Cyber Café, 20785 E. 13 Mile Road, Roseville
Spin City Internet Café, 2117 S. Cedar Street, Suite B, Lansing
East Point Business Center & Internet Café, 3097 Genesee Road, Flint
West Point Business Center & Internet Café, 1493 S. Linden, Flint

 

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http://www.mlive.com/business/index.ssf/2012/06/the_fight_continues_over_legal.html

Internet Sweepstakes may have constitutional protection

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By Jon Greenberg
news@seacoastonline.com
May 27, 2012 – 2:00 AM

When you enter a room and see people sitting in front of computer screens with spinning rows of jewels, cherries, bells or 10-gallon hats, eagerly hoping the images line up, you might be forgiven for thinking you are watching video-slot-machine gambling.

You would not be alone.

“What I want to know is,” asks Portsmouth City Attorney Robert Sullivan, “why is this not gambling?”

The operators of what are called Internet sweepstakes cafes say they have an answer that would hold up in court and keep their businesses running. State lawmakers would like to pass a law that shuts them down.

Lawmakers say they know gambling when they see it, but in the world of gaming, something that looks like a duck and quacks like a duck might not, in the funhouse of law, be a duck. Other states have tried to declare open season on these operations and failed. In Florida,
sweepstakes cafes represent a billion-dollar industry. In Ohio, estimates are in the tens of millions. North Carolina is now on its third attempt to legislate them out of existence and, so far, the state is losing. Massachusetts began to tackle them a year ago with emergency regulations from the attorney general.

The essential stance of the Internet sweepstakes parlors is that they are selling phone cards or Internet time just like McDonald’s sells hamburgers and Publishers Clearinghouse sells magazines. And like the big guys, they offer a sweepstakes to boost sales. The video-slot-machine games are simply window dressing; a more entertaining way for customers to find out, bit by bit, if they’ve won.

“The results of the sweepstakes don’t change,” said Mark Puffer, a Concord lobbyist and attorney representing the operators. “The prizes are predetermined.”

The games have no bearing on the outcome, even if the customers get the impression that playing them does.

SEE OUR CERTIFIED FINITE GAMES

This similarity to conventional sweepstakes has states tied up in knots. Anthony Cabot is the head of the gaming law section with the firm of Lewis and Roca in Las Vegas.

“What legislators are trying to do, and sometimes inarticulately,” Cabot said, “is to affect the Internet cafes without the rest of the sweepstakes industry.”

Pinpointing a fundamental difference between one and the other can be hard.

The Massachusetts regulations and the bill in New Hampshire say the difference lies in the mindset of the customer. Massachusetts cries foul when gambling “predominates over the bona fide sale of bona fide goods and services.”

The New Hampshire attorney general’s office crafted language for the Senate that, among other things, calls it gambling when people buy things because they want to play in the sweepstakes, not because they want whatever they bought.

To see what customers are buying, Seacoast Sunday sent someone to play at the 3D Business Center store in Portsmouth. What the reporter found undermines the claim that phone cards are what get people inside. The person bought a card for $20. If she wanted to use it to make a call, she needed a PIN, but no one at the store mentioned that or told her where to find that code. A store poster listed phone rates of 3 cents per minute, but some simple math showed nothing that linked that rate, the money paid and the time on the card.

On the other hand, the staff spent at least 15 minutes helping the customer play the video-slot-machine games. They suggested various games and said, “If you’re playing a game and it’s not doing well for you, switch and you can find one where the odds are better.” One staffer said, “Some people figure this out and they just know which games to play.”

Experience might not guarantee success. One customer pocketed $30 in winnings and, when asked how the store stays in business, he said, “Because sometimes you don’t win.” Asked if he ever used the card to make a call, he snorted and said, “Why would I do that?”

In fact, the sweepstakes operators seem to encourage customers to forget that the card represents phone time. Instead, like a magician distracting your attention during a card trick, they focus on what is called the sweepstakes value of the card. The sweepstakes value is what allows you to continue to play on the machine. The game display shows the value of the card constantly shrinking, regardless of winnings. When the sweepstakes value reaches near zero, you have to put more points on the card. At the start of your session, the store will give you a free dollar’s worth of points, but if you want more, you would hand over more of your own money, which would add phone minutes as well as sweepstakes points.

The mental disconnect between the card and its stated purpose can be extreme.

In North Carolina, where the card was good for Internet time, one player had more than 80,000 hours. That equals more than nine years of Web time, accumulated by spending several hundred dollars on the sweepstakes each weekend.

Several legal experts say by targeting this disconnect, the bill in New Hampshire could be effective in separating the sweepstakes cafes from the McDonald’s type promotions — with one big drawback.

“The difficulty will be in demonstrating that people are not buying anything of value,” said Jeff Welty, a lawyer in the University of North Carolina School of Government.

In Ohio, the government has a different concern. Police in one community near Toledo seized the game machines and sent them to a computer lab for testing. What they found were ordinary video slot machines. The software had nothing to do with any sweepstakes.

The thrust in Ohio, which recently legalized casino gambling, is to regulate the industry. “The goal is to protect the consumer and make sure the machines are operating fairly,” said Mike Dittoe, spokesman for the House Speaker’s Office.

Under one proposal, operators would pay a hefty licensing fee to cover the cost of testing and certification.

The outright fraud in Ohio underscores the challenge facing any state where these machines pop up. Without clear government authority, the sweepstakes parlors avoid all oversight. Establishing that authority can be tricky and results short-lived. The poster child of this dilemma is North Carolina.

The state first allowed video poker in 2000. Six years later, lawmakers banned it and the industry shifted to Internet sweepstakes. The legislature moved again and, focusing on the underlying technology, banned “server-based” games. Welty, the UNC professor, said the game owners barely missed a beat.

“What operators did,” he said, “was reprogram the machines so they were no longer server-based and no longer fell under the law.”

North Carolina’s latest effort faces an uphill battle in court on the grounds that it violates the First Amendment.

“The operators are very adaptable,” Welty said.

That might serve as a word of caution to New Hampshire lawmakers who hope to ban the sweepstakes-style Machines here.

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Charges dropped against Michigan sweepstakes owner

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Snap decision leads to charges that were later dropped today
By ADAM FERRISE

Tribune Chronicle

WARREN – An email from a city employee to the owner of a former Mahoning Avenue Internet sweepstakes cafe was among the reasons criminal charges were dropped Monday against a Michigan man who was acquitted of several gambling charges across the state.

Misdemeanor gambling charges against Robert Dabish, 37, 13127 Common Road, Warren, Mich., were dismissed by city prosecutors the day jury selection in Dabish’s trial was set to begin. Charges against David L. Miner, of 2296 Parkman Road, who operated the Player’s Club cafe, 2700 Mahoning Ave. N.W., also were dropped.

The Player’s Club and two other Internet cafes in the city were raided March 25, 2011, after Trumbull County Prosecutor Dennis Watkins issued an opinion that he believed the cafes were operating illegally. Charges are still pending against the five others charged with operating and owning the two other cafes, Warren Law Director Greg Hicks said.

“We’re pleased things ended up the way we thought they would,” said Dabish’s attorney, Dennis DiMartino. “We looked at his case and how he did business and we were always confident that the end result would be acquittal.”

DiMartino said part of what brought the dismissal was an email from Warren Community Development Director Mike Keys that told Dabish the law department would approve the business pending the outcome of Dabish’s criminal trial in Toledo at the time, in which Dabish was eventually acquitted.

Keys on Monday said he relayed advice he received from the law department. “I have no direct say in whether there can be Internet cafes in the city,” he said.

Hicks said the email indicated only that Dabish was permitted to open a “legal business” and that “the official misspoke.”

“That added to the difficulty of the case,” Hicks said. “What a city official says does carry some weight.”

DiMartino said Dabish will re-open the Player’s Club, likely at the old location. The city and Dabish also agreed Monday to release Dabish’s equipment that was taken during the raid. In turn, Dabish dismissed a civil lawsuit against the city in which he sought the same equipment.

Dabish’s civil attorney, Sam Amendolara filed a civil complaint after the criminal charges were dismissed Monday, asking Trumbull County Common Pleas Court Judge W. Wyatt McKay to order his business’ equipment returned.

Hicks said the city reserved the right to file new charges against Dabish if new evidence presents itself or if Dabish violates any gambling laws after he reopens the cafe.

“There were issues regarding the investigation and evidence in the case,” Hicks said. “Some other issues made the case difficult, if not impossible, for a jury to sift through and ultimately decide he was guilty.”

Hicks also pointed to the gray legal area of Internet cafe regulation and criminalization. Laws regulating cafes have been proposed recently, including one that would require the state casino commission to inspect and regulate the games provided to the cafes by software companies. It would also require the cafes to post the odds of winning the games.

Another bill would require cafes to register with the state.

“They’re trying to regulate it but in some ways they are muddying things up,” Hicks said. “None of the businesses are operating to sell phone cards. It’s really a guise for gambling. They need to cut through the minutiae.”

An estimated 20 to 30 Internet cafes exist in Trumbull and Mahoning counties. The difference between illegal establishments and legal ones, prosecutors say, is the amount of cash prizes a customer can win from playing the “sweepstakes” games offered by the businesses and if the games they provide are games of chance, rather than skill-based games.

Cafe owners have argued they offer phone cards that give customers Internet time and can use the computer to surf the Web as they wish. They say the sweepstakes part of the experience is simply a marketing tool.

DiMartino said Dabish operates his Internet cafes here and in Fremont differently then most cafes. He said Dabish’s cafes were always legal and courts in northern Ohio have agreed.

Dabish was acquitted during a 2009 bench trial by Toledo Municipal Court Judge Francis X. Gorman on two gambling related charges because the judge found the operation was legal.

Criminal charges against Marvin Dabish, of Oregon, Ohio, were dropped earlier this month. Marvin Dabish had been charged with operating one of Robert Dabish’s Player’s Club in Fremont. Prosecutors dismissed the charges with the stipulation they can re-charge him within 60 days.

Robert Dabish, following the raid that shut down the Fremont Player’s Club, sued the city, officials and state Attorney General Mike DeWine.

The lawsuit alleges the raid was “politically motivated, ill-conceived and illegal.” Dabish is seeking his property returned, to permanently stop the raids on his businesses and additional penalties. The case is still pending in U.S. Northern District Court.

“I don’t think he views himself as the patron saint of Internet cafes or anything,” DiMartino said. “He views himself as a smart, aggressive businessman. I think he’s frustrated that law enforcement haven’t examined his business close enough to make anything other than a snap decision.”

aferrise@tribtoday.com

© Copyright 2012 Tribune Chronicle | TribToday.com. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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