Busted bet: AP reveals sweepstakes industry’s cash-o-matic in North Carolina

Reporters discuss a series of scoops uncovering possible campaign-finance violations

COLUMBIA, SC — Last Wednesday, the newly-appointed State Board of Elections in North Carolina convened for the first time. Following Republican Gov. Pat McCrory’s election last fall, the board was in GOP hands for the first time in decades, and one of its first orders of business was appointing a new director. The board’s Republican majority selected Kim Westbrook Strach, a respected investigator who currently serves as the agency’s deputy director for campaign reporting.

Strach won’t have much time to settle in. One of her top responsibilities in her new role will be deciding how to handle allegations about campaign contributions tied to the state’s video gambling industry, which has spent hundreds of thousands of dollars trying to influence state officials—including McCrory, the man who just a week and a half ago appointed the new elections board. (In her deputy role under the old board, whose members had called for an investigation, Strach had already directed agency staff to begin reviewing the donations.)

The sweepstakes industry’s legal status in North Carolina, as in a handful of other states, is dubious: it has been barred by state laws and top state court rulings. But, as in other states, it has fought relentlessly for legal status, and the industry has cash to burn on lawyers and litigation. Thanks to lower court decisions, software tweaks, and spotty or corrupt law enforcement, the Vegas-style machines have proliferated despite the bans, and a bill to legalize and tax the games is now pending in the state legislature, with bipartisan sponsorship. Sweepstakes operators have given more than $500,000 in campaign contributions to state officials since 2010, and the single largest donor in the 2012 cycle was Chase Burns, an Oklahoma-based sweepstakes software entrepreneur who was recently indicted in Florida on felony fraud charges related to his business. “It’s like a guerrilla movement in a way,” is how Mitch Weiss, a reporter for The Associated Press, described to me the industry’s insurgent battles in the states.

Much of what we now know about the sweepstakes industry’s political activity in North Carolina comes from some standout recent reporting by Weiss and Michael Biesecker, his colleague at the AP. When I wrote a post on the sweepstakes issue back in March, I flagged a solid follow-the-money piece by the AP duo. Since then, they’ve owned the story. Their joint-bylined April 23 article tracked donations to North Carolina candidates from Burns back to a bank account that drew funds from his company. That suggests a violation of state law, which bars corporate money from being used “directly or indirectly” to support political campaigns. Their recent stories have also detailed the role played by a top law firm with a lobbying arm called Moore & Van Allen—where McCrory worked until days before taking office—in delivering the contributions. (The AP’s Emery P. Dalesio followed up with a May 4 piece spotlighting the firm’s relationship with McCrory and the sweepstakes industry.)

Biesecker and Weiss have also reported on concerns from Democracy North Carolina—a watchdog group that has been a key source for the coverage, and that has filed a sworn complaint about the industry’s political activity—that sweepstakes donations may have been “bundled” by lobbyists, another potential violation of state law. On April 29, the AP writers offered some substantiation for the bundling charge in an exclusive interview with one sweepstakes operator, who recalled how his $4,000 check to the McCrory campaign was added to a stack of donations from others in the industry, to be collected by lobbyists on their way to the future governor. That interview also produced some colorful quotes about the industry’s strategy for gaining influence, like this one:

“If we needed to write a check to Pat McCrory, I wrote a check to Pat McCrory.”

And, in reference to the governor, House speaker Thom Tillis, and Senate leader Phil Berger:

“We didn’t give them money because we liked them. We just knew they were powerful people up in Raleigh and they could get done what we wanted to get done. You give them your money and they’re supposed to do what they say they’re going to do.”

(It should be noted that, as the AP reported, Tillis and Berger have said they are going to donate Burns’s donations to charity, and McCrory has already made charitable contributions to offset donations from Burns and others who have been indicted. McCrory has also said he opposes the pending bill that would legalize the sweepstakes industry.)

Last week, I caught up with Biesecker and Weiss, who are based out of Raleigh and Charlotte, respectively, in separate interviews to discuss their work on the story. Weiss, who won a 2004 Pulitzer for investigative journalism, has done many of the interviews and much of the contextual research; Biesecker has handled much of the writing and digging through documents from North Carolina to Florida. What follows are lightly edited excerpts from those conversations:

When did the AP start investigating politicians’ ties to the sweepstakes industry in North Carolina?

Biesecker: The investigation really began with the arrest of Chase Burns.

These businesses have long been active at the legislature trying to push legislation to favor their industry. They’ve been the subject of three laws … that were intended to outlaw … video poker; and then they came back as electronic sweepstakes; and then there was a law to ban sweepstakes; and then they changed their software and remained in business. And there was the 2010 ban, which is the most recent and is the subject of a two-year court fight.*

We have followed that all along the way, but the current flurry of attention has primarily to do with the Chase Burns indictment in Florida and the realization that he was the largest donor in our most recent election and managed to do so pretty much under the radar. The timing of most of the donations was immediately before the election. I’m not sure if they would have ended up in the third quarter or fourth quarter reports. No one picked up on it at the time that the person spreading this money around was a sweepstakes operator from Oklahoma.

How do you balance your time working on the sweepstakes story with your other duties at AP?

Biesecker: Part of my job is to be an investigative reporter, so fortunately I have the freedom to invest some time in that. They did send me to Florida for a week to work with our Florida AP crew following up on the Allied Veterans scandal there, where Burns was one of the primary people arrested and described—along with the lawyer Kelly Mathis of Jacksonville—as a mastermind in all of this stuff.

Weiss: I get to spend enough time to really understand the industry and to break stories. Michael and I have been really lucky in this in that our editors understand that this is a big story, that there are parts that continue to break.

What Michael was able to do when he looked at the documents down there [in Florida] was find this wider connection. And this led us back to the donations and the sweepstakes money in North Carolina, and how Chase Burns’s money ended up coming back to fund the political campaigns of not only McCrory but also of other powerful Republicans in North Carolina.

Really, Michael was one of the catalysts. He went down there to do a profile, and instead, digging through the documents, found another connection and was able to break off another angle. The editor sent him down there for one thing and he came back with something completely different. It’s a story that gives you an inside look into how this industry operates and what they expect in return for their donations.

You’ve relied a lot on public records to report this story. What about things that aren’t necessarily public?

Weiss: As an investigative journalists you not only have to dig though documents—you have to be able to do the reporting, you have to be able to go out and you have to be able to listen to what people tell you.

One of the things we really wanted to learn is how the sweepstakes industry operates and works. We made a lot of phone calls. I was fortunate enough to reach a guy who doesn’t talk to the media … and he owns 34 Internet cafes in North Carolina. [A series of phone conversations with that operator eventually led Weiss to a hole-in-the-wall hotdog joint in South Carolina, where he spoke with him for hours—the “exclusive interview” mentioned above. It took a while, but eventually the man explained the procedure for donating sweepstakes money, bundling, that is the subject of Democracy North Carolina’s complaint.] It’s not something that somebody will tell you right away, but if you’re interested, you spend the time on the phone and in person and you give them enough face time and you do the shoe-leather reporting, they’ll usually open up.

What does this story mean for North Carolina politics?

Biesecker: It raises a lot of questions about the revolving doors between the lobbying firms in Raleigh and the elected officeholders. Traditionally in a lot of places people would resign as a state legislator and then there’s a cooling-off period required by state law, and the next thing you know a lobbying firm is sending out a release announcing that they’re a new partner.

With Gov. McCrory, he was working at a lobbying firm prior to taking office, up until within days of taking office. It’s a large law firm as well, Moore & Van Allen in Charlotte, and they have a robust lobbying arm that they’d beefed up while McCrory was working there. He never registered as a lobbyist, but he’s also not a lawyer and he’s been consistently vague about exactly what he did do at the firm, so now you have a lobbying firm with a pretty strong connection to a former employee who’s the governor of North Carolina. So the revolving door is turning the other direction, and I think that’s new.

Certainly the sweepstakes issue and the involvement of Moore & Van Allen in representing Chase Burns is opening up sort of broader questions about the influence that lobbying firms are playing and the access that they have to the state’s top elected leaders.

What’s next?

Weiss: We’re going to be staying on top of it and we’ll be reporting all the developments and digging deeper. There are other stories that Michael and I would like to work on, and I’m sure we will—and of course there are the breaking stories.

There’s a lot of smoke there. Should the Board of Elections look into it? You have to ask them. I think there could be fallout if they don’t. Then you have to hold them accountable: Why didn’t you? It’s all speculative at this point, because we just have no idea what they’re going to do.

* Correction: The original version of this sentence incorrectly referred to a 2010 state Supreme Court ban. The 2010 ban was the result of a law; the two-year court fight that ensued ended in a 2012 court decision upholding the law. CJR regrets the error.

Follow @USProjectCJR for more posts from this author and the rest of the United States Project team.

Has America ever needed a media watchdog more than now? Help us by joining CJR today.

Corey Hutchins is CJR's correspondent based in Colorado, where he is also a journalist for The Colorado Independent. A former alt-weekly reporter in South Carolina, he was twice named journalist of the year in the weekly division by the SC Press Association. Hutchins recently worked on the State Integrity Investigation at the Center for Public Integrity and he has contributed to Slate, The Nation, The Washington Post, and others. Follow him on Twitter @coreyhutchins or email him at coreyhutchins@gmail.com.