WV Lottery Commission Hands Out Penalties, Sets Sights on Operat - Business, Government Legal News from throughout WV

WV Lottery Commission Hands Out Penalties, Sets Sights on Operators

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CHARLESTON - The West Virginia Lottery Commission is moving forward with penalties for limited video lottery operators and the organizations that have the machines.

A fraternal organization can operate as many as 10 limited video lottery machines per location. 
For regular retailers, the limit is five. But in the past several months, the West Virginia Lottery Commission has been investigating both operators and some fraternal organizations investigators found skirting the law for an advantage on machine numbers.

In show-cause hearings that took place Jan. 23-24 and Feb. 10, seven fraternal organizations testified before the commission about their LVL operations. Click HERE for our previous coverage on the hearings.

The Lottery Commission used information from the testimony to hand down civil penalties totaling $1,000 April 29 to each of the following limited LVL holders: the Fraternal Order of Police No. 89-Princeton; FOP No. 87-Monongalia/Preston; Marshall County FOP No. 112; West Virginia FOP-Moundsville; and the West Virginia State Council of the Vietnam Veterans of America.

The violations were divided into two categories: Lack of control of the operations and problems with management contracts, with the operators functioning illegally as fraternal organizations. 

The fines were broken down as $500 for the control issues and $500 for the management issues. A sixth fraternal, Elks Lodge 482-Clarksburg, was fined just $500 for one violation of the control facet.

The Commission found that the organizations were merely the license holders for machines and not operating their own establishments. In addition to the fines, each organization had its number of video lottery machines reduced from 10 to five each.

“This is the result of the hearings that we’ve had,” said West Virginia Lottery Director John Musgrave. “We think we’ve been quite generous, and yet it’s going to be severe fines and penalties.
"There were a number of issues that caused us concern.”

Next month, the lottery commission promises to deal with operators illegally running “fraternals.” An action plan will be established for operators at the commission’s next meeting because it was not on the April meeting’s agenda.

Action Gaming Inc. of Wheeling has expressed interest about coming into compliance, the commission said, adding that Action Gaming “stepped up in making an effort to resolve its shortcomings.”

“We have already talked to Action Gaming,” said Musgrave. “They’ve agreed in principal (to fines of more than $180,000)." 

Musgrave said if the licensees don't report to the commission, and auditor will be sent to the retail locations and they will be subject to the maximum fines.

Action Gaming operates 450 machines in about 100 locations, according to its president Dave Shriver.

“(Action Gaming) has all of these places that we are looking at that are fraternals,” Musgrave said. “We feel that in our investigation that all of them have some of the factors that we’ve discussed. So, multiplying all of those out, at $10,000 maximum fine (per offense), it would be about $760,000, if we were to go to everyone, do the hearing, take the testimonies … but in order to simplify things, and we’re going to apply this across the board to everybody.

“Action Gaming has been doing the management. A lot of the fraternals didn’t even know where their lodge was located. We’re saying that the licensee – that we license – has to run the establishment. They have to be in charge and do the payroll, make the decisions. The operators that are doing it for them, they’re going to have to change management. They’ll need to sever themselves.”

Shriver attended the January and February meetings, including the meeting April 29.

“We’re going to work with the lottery every way that we can,” Shriver said after the meeting. “Whatever they want us to do, we’re going to do.”

Tom Zimmerman, who represents Action Gaming through Zimmerman Law Office of Morgantown, said he couldn't comment because the situation "is still a work in progress."

“We’re working closely with the lottery commission, and that’s all we can say at the moment,” Zimmerman said.

There is an advantage for operators to cooperate with the lottery commission, commissioners said. If operators choose to self-report violations, the commission will show leniency. There will still be fines, commissioners explained, but consideration for reduced fines will be made for operators being forthcoming within a 30-day compliance window.

A fine of up to $10,000 — per violation — is the maximum penalty the commission can hand down. Licenses would not be forfeited.

“We want to get the word out there that we mean business,” Musgrave said. “If they don’t come forth themselves, our investigators and auditor are going to be visiting. We’ll look at their records — and them they’ll be subject to the full penalties that we can assess, or loss of license.

“Action’s attorneys came to us. They told us that they want to get through this. They’re willing to abide by this proposal and they want to do it. This will apply to every licensee, across the board.”

Musgrave also said a similar operator, Bucks Inc., which had a representative at the April 29 meeting as well, is expected to approach the commission through its attorneys and be cooperative in ongoing meetings and investigations.
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