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Crackdown on charity poker rooms brings backlash

Monday - 11/4/2013, 3:30pm  ET

DAVID EGGERT
Associated Press

LANSING, Mich. (AP) -- Explosive growth in the popularity of poker has helped Michigan's charities, churches and civic groups stay afloat at a time of dwindling donations, so the state's efforts to rein in the charitable gambling industry is sparking backlash.

The industry has grown by more than 20-fold in the last decade, and Gov. Rick Snyder's deputy lawyer Dave Murley drew rare boos when he recently told lawmakers: "Charitable poker began as a good cause, evolved into a highly lucrative business and has degenerated into a racket."

At stake is the future of "millionaire parties," casino-style events where nonprofits split cash proceeds with unlicensed poker rooms that provide the space, dealers, poker chips and playing cards along with food and drinks.

Many veterans groups, prep sports booster clubs and other nonprofits are no longer hosting Texas Hold 'em and blackjack fundraisers in small church basements. Instead, they're contracting with what authorities charge are large "de facto casinos" run through bars and poker rooms.

Revenue from the events was $7.9 million in 2002 -- but hit $197 million in 2011, according to state records. Charities' profits rose from $3.6 million in 2002 to $19.2 million two years ago.

Other states also are tackling charitable gambling. In New Hampshire, a panel working on potential casino regulations has been asked to strengthen rules to ensure charities and the state are getting their fair take. Legislation in North Carolina would allow nonprofits to host charity gambling events in hotels, restaurants and other locations.

In Michigan, tension has been building since June 2012, when Snyder transferred oversight of the millionaire parties from the Lottery Bureau to the Michigan Gaming Control Board. The board and its regulators are more familiar with monitoring highly regulated operations at horse tracks and Detroit's casinos.

The agency cracked down on some larger bars, contributing to a 22 percent drop in licenses issued for millionaire parties through the first half of 2013. And now, tough new regulations are being proposed by its executive director, Richard Kalm.

Among the most significant plans: requiring that five members of a charity be on hand to help run the games; limiting a single location to hosting one event a day and no more than 120 a year; and restricting the fees that poker room businesses charge charities.

"What started out being the charities' money -- the charities' profit -- has been whittled away at," said Kalm, who also wants to lift a moratorium on new charitable gambling sites once the rules are in place.

A decade ago, charities received 81 percent of the proceeds. Now they receive half because of profit-sharing agreements never envisioned when the casino-style charity games were authorized in a 1976 update of the state Bingo Act, Kalm said.

However, charities and establishments running the millionaire parties support the current system and are suspicious that Snyder's administration is working at the behest of casino interests. Regulators deny that accusation.

Charities say modest regulations are OK, but they call the proposed rules an overreach that could significantly hurt legitimate fundraising and put permanent poker sites out of business.

Dane Nickols with the Laingsburg Lions Club said that while charities are taking less of the cut on a percentage basis, they are still raising much more money.

"We want the rooms to make money so they will continue and be there for us to make more money," he said.

Nickols said his club raised only $600 the first time it organized a poker event. When it turned to an established card room in a Lansing-area sports bar, on the advice of lottery officials who audited his organization, "we were able to make more money," he said.

The dispute prompted lawmakers to hold a hearing last week on the proposed rules, which Rep. Jeff Irwin said "go far beyond attacking the bad actors or the violators."

"(The rules) really threaten to shut down a whole lot of operations that are raising $15 to $20 million a year for charity ... and employing many, many, many people," the Ann Arbor Democrat said. "If we go too far we're going to ruin a good thing."

Public hearings are set for later this month, after which the gaming commission could make revisions before submitting the new rules to the 10-lawmaker Joint Committee on Administrative Rules. The panel will have 15 days in the legislative session to object, and if no objections are raised, legislators will have 15 more session days to approve legislation to stop the new rules.

"The emphasis has to be on the charities, not the operators," said Sen. John Pappageorge, a Troy Republican. "We want them to make their fair living, too. ... But we have to in the rules place the poker houses in proper relationship to the law."

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Online:

Millionaire party updates: http://1.usa.gov/1asE3Ba

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Follow David Eggert at http://twitter.com/DavidEggert00


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