Illegal video gambling: Still a sure bet, or busted?

Want to try your luck at slots without leaving Maryland? You don’t have to wait to see if voters approve the gambling machines this fall. In Baltimore and Baltimore County, you can play right now—and win money.

You won’t see a giant faux pyramid out front to mark the entrance to one of these local gambling hotspots. And no light will flash to mark you a winner. But someone keeping score will slip you an under-the-table, illegal payout if you win.

Two years after an Abell Foundation report (PDF) found that illegal video gaming is costing the state and local governments millions in lost tax revenue, Baltimore’s underground gambling industry is still alive and well. The video machines show up in bars, liquor shops, convenience stores, clubs, laundries and even at a car wash.

There are close to 1,440 registered video gambling machines across Baltimore County, according to a 2007 county licensing list. Baltimore City didn’t provide a similar list to Exhibit A, but the 2006 Abell report estimated the number at 2,106. These numbers don’t include unlicensed machines.

Together there are almost as many registered machines now as could be approved by voters this fall for Baltimore City. If the slots referendum passes, it would allow 3,750 machines at a single slots palace in Baltimore.

While other counties ban video gaming machines outright, Baltimore-area officials allow games with names like Fruit Bonus and Turbo Poker as long as they are played just for amusement, not payouts—wink-wink, nudge-nudge.

“When the machines are sold, they are legal. We equate it to a deck of cards. The cards themselves are not illegal; they become illegal when you’re running poker games out of your house,” said Don Mohler, a spokesman for Baltimore County Executive James T. Smith Jr.

You’ve gotta play to win

There was little else to do but gamble in a South Baltimore bar one night last month. The tiny tavern had a pool table, two televisions offering standard cable fare and a small supply of bagged chips to munch on.

But three other televisions mounted to the wall showed constantly running Maryland lottery games. You could bet every couple of minutes on what virtual horse would win a race or what computerized poker player would take the round of cards.

Along the wall were five video games resembling slot machines.

Ben (not his real name) slouched in front of one, his eyes glazed, for close to an hour as he punched the buttons. He was an older, thin man with a tooth missing on the right side of his mouth. He wore a loose windbreaker and baseball cap. Ben said he’d once won a couple hundred dollars at slots at that bar.

A man named Dan played the games, too. Dan knew all the tricks to playing fruit slots. Look for “cherry hits.” Never double down. A tan fedora covered his gray hair and obscured his unshaven face. He played often, occasionally talking about strategy, not winnings.

Theory vs. reality

Not all shop owners pay winnings. In theory, the players and the bartenders who pay them, and the owners of bought or leased video machines could be fined up to $1,000 for the misdemeanor offense and receive a one-year jail term.

But the state law is rarely enforced. When it is, police, regulators and prosecutors usually target the machine owners by confiscating the games and any cash in them. Fines are typically low.

Cindy W. Johnson is one such bar owner. Baltimore liquor board officials could have fined her $3,000 in March 2007. Police had witnessed an illegal video game payoff at her bar, Butts & Betty’s Tavern in Butchers Hill. They also found unlicensed video gaming machines and incomplete documentation on the tavern’s employees. She had been before the board for different violations before.

They penalized her $325 and gave her a very long lecture.

“We have a problem with gambling in the city on these machines, and they cause a whole parade of horribles. These people with these machines know the weakness of folks, and, consequently, they control them through these machines. That’s a public policy situation which we don’t want to allow in the city,” said Commissioner Edward Smith Jr., according to liquor board transcripts.

The fine, similar to what the liquor board charged other violators, was small considering that illegally used machines earn about $500 to $1,000 a week, according to the Abell Foundation report.

Many places with video gaming devices do pay out, especially once the operator knows a customer isn’t a vice cop.

If the slots referendum passes, Dan is convinced the illegal machines will disappear. He thinks the state will want the tax money from legal slots too much to allow illegal ones to compete.

State legislative analysts estimate that slots at five voter-approved locations would bring in $660 million annually in taxes and fees to Maryland by 2013. Baltimore City, which would host one of the slots sites, is to receive $19.2 million a year.

Analysts did not, however, estimate what effect the area’s underground slots-like gambling would have on that revenue.

Is anyone addressing the problem?

Past action from public officials has been mixed.

After the 2006 Abell report estimated that the state lost $15 million annually in untaxed income from the games, little changed.

When contacted by Exhibit A, Baltimore police did not provide statistics on any video gambling raids they conducted last year. And while prosecutors were trained a few years ago to handle video gambling cases, few cases have gone to court.

“I can’t remember any case in the last 18 months,” said Patricia Deros, an assistant state’s attorney in the city.

Baltimore County, on the other hand, has changed its stance somewhat. In February, the county stopped issuing new permits for machines to people who had been caught operating the machines illegally. Before, when video gambling machines were confiscated in raids, video machine owners just got new licenses and bought new machines.

On May 9, the county conducted one of its biggest raids ever. Police hit 41 locations and seized more than 100 machines. They targeted a vendor, Baltimore-based Carbond Inc., which was one of the area’s primary owners of video gambling machines in 2006, according to the Abell report.

Last year Baltimore County police used 13 search warrants to build 43 cases and seize 99 machines.

“We believe that by seizing the assets and seizing the machines and by preventing these people from getting new permits, we’ve done a good job of enforcing,” said Leo Ryan, deputy state’s attorney.

Also, taking part in a federal investigation paid off May 19 for Baltimore County. Its police department received $176,402 from the Internal Revenue Service as its share of proceeds after Truck Stop Games LLC forfeited $2.5 million in a plea agreement.

Truck Stop Games pleaded guilty to money laundering for a scheme involving its slot machines at TravelCenters of America stops along Interstate 95 in Baltimore, Jessup and Cecil County. The machines awarded players points—the amount varying by chance—that could be redeemed for food or merchandise at the truck stops. This violated state gambling laws.

How can the laws be enforced?

The illegal video machines carry hidden costs for the state. Many are unregistered. And it’s hard to track the true taxable income of even the machines that are licensed. The Abell report estimated that machine owners underreport their income by $63 million a year.

“These machines are a virus. They are very difficult to get rid of once they have infected a neighborhood,” said state Comptroller Peter Franchot.

The report spurred Franchot’s office to try to increase tax collections from the machines. Last year the office began auditing businesses that held permits for video gambling machines but didn’t have an admissions and amusement tax account with the state. Last year state lawmakers raised the tax rate that game owners are supposed to pay on collections from 10 percent to 20 percent.

Since starting the audits, the comptroller’s office has widened the scope of its probe. But officials say the task is complicated. Video gambling is a cash business. There is no way to determine how many times each machine is played.

And just try to find good bookkeeping on them.

When machine owners are asked for records, “For the most part they’ll say, ‘I don’t have them,’ or ‘Geez, I throw them away every week. I didn’t know I needed to keep them,’” said Chris Riley, assistant director of the compliance division of the comptroller’s office.

A Baltimore politician blamed the continued presence of the gambling machines on a lack of common purpose.

“It is ridiculous. Let’s just say these machines are very entrenched. And until we get focused on enforcement, they will be entrenched,” said City Councilwoman Mary Pat Clarke. “We are going to have to mean business.” {EXA}

Kathleen Johnston Jarboe is a freelance writer based in Howard County.