COLUMBIA, SC — North Carolina’s Republican governor, Pat McCrory, this week found himself giving back campaign contributions tied to so-called Internet “sweepstakes cafes”–and beating back questions about his ties to the video gambling industry.
It’s been a rough couple of months for the sweepstakes industry. (The name refers to the argument that video gambling entrepreneurs use to claim their business is legitimate–likening it to legal “sweepstakes” contests, like McDonald’s “Monopoly” promotion.) Earlier this month, a years-long state-federal racketeering probe led to dozens of arrests amid charges that a Florida-based charity called Allied Veterans of the World was really a $300 million front for an Internet gambling business, as well as the resignation of that state’s lieutenant governor.
In North Carolina, meanwhile, the state Supreme Court in December upheld a ban on video sweepstakes machines, and there are reports this week of crackdowns on local operations by county sheriffs.
But the industry doesn’t plan to go quietly. “North Carolina’s crippled video sweepstakes industry says it’ll keep asking lawmakers and Gov. Pat McCrory to consider legislation to regulate and tax their games despite a gambling scandal in Florida,” WRAL in Raleigh reported on March 21.
Those requests are accompanied by a steady flow of campaign cash. In a solid piece published Tuesday, Associated Press reporters Michael Biesecker and Mitch Weiss reported on that contribution McCrory returned (it came from a woman whose husband was indicted in Ohio on charges connected to an illegal gambling operation). They also document, with an assist from the watchdog group Democracy North Carolina, more than $50,000 in donations to McCrory from the industry that hadn’t previously been reported.
The sweepstakes operators, though, haven’t limited their focus to the governor’s mansion. Biesecker and Weiss write:
The AP verified the donations Democracy North Carolina identified to McCrory’s campaign finance reports and also searched for cash distributed by the same individuals to other campaigns. All told, they gave at least $140,000 in political donations in recent years.
Those donations were part of a much larger flood of money from sweepstakes operators that quietly flowed into campaign accounts of North Carolina politicians from both parties during the state’s most recent election cycle. Lobbyists for the sweepstakes industry are gearing up to push for new legislation legalizing the cafes, which continue to operate in the state despite repeated attempts by lawmakers to shut them down.
The story now unfolding in North Carolina–of law enforcement crackdowns and lobbying pushback, a lucrative industry operating in legal limbo, and political money flowing through both legal and at-times illegal channels–is a familiar one. It’s practically a mirror image of events in recent decades just across the state line, where last Friday South Carolina Gov. Nikki Haley signed a bill banning sweepstakes cafes. So as the legislative debate over the sweepstakes industry, and the influence the industry wields, plays out in the Tar Heel state, North Carolina reporters might find lessons in the experience of their neighbors to the south. (Disclosure: As a staff writer for the Columbia, SC Free Times, I’ve covered the debate over the industry here.)
Cindi Ross Scoppe, a longtime columnist for The State, the daily newspaper in Columbia, described the history in South Carolina this way in a February 2012 column:
Video gambling snuck into our state while no one was watching, gaining a foothold in out-of-the-way convenience stores and bars and then waging an insurgent battle through the courts, aided by a crooked senator who deceived his colleagues into passing what he called a “technical amendment” that in fact legalized gambling.
By the time we realized what had happened, it had grown to a $3 billion-a-year industry. It was nearly impossible to walk into a convenience store without seeing a machine, with its flashing neon lights beckoning players. Restaurants and bars were overrun with them. Gaudy casinos dotted nearly every corner and created ready-made villages along the state borders.
When Gov. David Beasley challenged the poker barons’ refusal to obey our meager laws, they took him out, and set about trying to buy themselves a Legislature that would rescind all the restrictions.
The state Supreme Court abolished video poker in South Carolina in 1999, but conflicting rulings by magistrate judges left the legal status of similar gambling operations unclear–an ambiguity that the new law seeks to eliminate.
Perhaps more than any other journalist in the state, Scoppe–a recipient of the Hal Hovey-Peter Harkness Award bestowed by Governing magazine for outstanding coverage of state and local government–chronicled video poker’s heyday, its abolition, and its attempted return in recent years as the sweepstakes industry. So I asked Scoppe what advice she would give reporters covering the sweepstakes battle in North Carolina.
Instead, she told me over email what the South Carolina press corps failed to do until too late:
We didn’t pay close enough attention to the industry as it was proliferating. In fact, we slept through it, largely because it gained its foothold in small towns and in the sorts of places that reporters and editors and, frankly, the people reporters and editors hang out with, don’t frequent. By the time we noticed how big it had gotten, it was a monster. Perhaps if we had raised the alarm sooner, it would have been easier to stop.
We didn’t pay attention to the court fights that were going on. If we had, we would have seen that the industry was abusing our legal system in order to buy time to keep printing money. If we had documented this pattern earlier, it might have shaken up the Legislature.
We didn’t examine the money or hold lawmakers accountable. The House tried for years to shut down the industry; the Senate refused. No one examined the campaign donations to the senators who were blocking the legislation and outed those senators’ motives.
We saw this as a moral fight, waged largely by right-wing evangelicals who just don’t want to let anyone have any fun, rather than recognizing it for what it was: a fight for the heart and soul of our government. A battle against political corruption.
We fell into the trap of “I already said that.” Politicians repeat their messages over and over. We say it once and think we’re done. Whether it’s opinion or factual information, people need to hear it over and over before it sinks in. They particularly need to hear it over and over when people on the other side are dismissing it over and over.
As that Tuesday story by the AP’s Biesecker and Weiss suggests, reporters in North Carolina are jumping on the follow-the-money angle–at least, the part of the money trail that is disclosed publicly. But they should also be checking the back doors. In both South Carolina and North Carolina, the industry’s direct and undisclosed ties to local politicians and law enforcement have led to state and federal investigations of public corruption. Some led to prison sentences; others are still ongoing.
And the stories offer nothing if not color. In 2008, David Forbes and Jason Sandford wrote a 2008 story for the Asheville, NC-based alt-weekly Mountain Xpress about an illicit video-poker operation spanning the state line that depended on payoffs to store owners and local law enforcement:
It was easy money, and there was plenty of it: Enough, it seemed, for everyone. But nobody wanted to stop when North Carolina began restricting the operation of the gambling machines and eventually banned them outright. Federal agents took notice, however. Working the edges of the conspiracy, the feds started marking key players and amassing their evidence. Raids on stores and homes revealed the extent of the bribery-and-public-corruption scandal.
Gradually, the personalities involved began to emerge: a gruff sheriff with a one-eyed parrot; a Greek immigrant living the American dream; a dull deputy who loved the trappings of law enforcement; a slick salesman with a brash attitude. And details came to light that put the case in the realm of pulp fiction: bricks of cash wrapped in foil and stashed in ceilings; videos recording backroom deals; code names such as “Judge” and “J”; and bribes handed over in church parking lots.
That “gruff sheriff”? He went to prison for 15 years on corruption and extortion charges.
Meanwhile, in present-day South Carolina, state law enforcement has been investigating a town councilman and perhaps others for ties to the video gambling underworld after sources leaked audio recordings of the public official explaining how local law enforcement and politicians were providing cover for the industry.
I hope North Carolina reporters can benefit from Scoppe’s explanations of how the state press corps across the border missed opportunities to expose an under-the-radar story about the power of money in politics until it was too late. It’s a story recent headlines show is still far from over.
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Corey Hutchins is CJR’s correspondent based in Colorado, where he teaches journalism at Colorado College. 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 writes about politics and media for the Colorado Independent and worked on the State Integrity Investigation at the Center for Public Integrity; he has contributed to Slate, The Nation, the Washington Post, and others. Follow him on Twitter @coreyhutchins or email him at coreyhutchins@gmail.com.