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May 12, 2014

New rules may eliminate many charitable poker rooms

By Sarah Wojcik
C & G Staff Writer

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Dozens of people play Texas Hold ’Em inside The River, a charity poker lounge in Shelby Township.

METRO DETROIT — Now is a tense time among the charitable gaming community.

New rules proposed by the Michigan Gaming Control Board would severely limit the amount and type of business conducted in charity poker lounges.

Charities, room operators and the Michigan Charitable Gaming Association are concerned about revenues decreasing from millionaire parties, while the Michigan Gaming Control Board said it is targeting a rash of crime, fraud, liquor-law violations and unregulated poker rooms acting essentially as casinos.

Millionaire parties are defined as casino-style events in which nonprofit organizations split costs with locations that supply all necessary accommodations.

Currently, three charities are allowed per room per day, operating seven days a week, 365 days per year. Venues receive no more than 50 percent of profits after necessary and reasonable expenses. Two members from the charity are required to be present.

The new rules would allow one charity at a time, up to two per day, to host millionaire parties, operating four times a week, 208 days per year. The venues would make $250 rent, plus the cost of food and beverage sales. Charities also would have to hire their own licensed suppliers for casino equipment and have at least three members present to handle money. Suppliers would receive no more than 45 percent of profits after necessary and reasonable expenses.

Because the Joint Committee on Administrative Rules, a bipartisan state legislative committee responsible for the oversight of rules proposed by state agencies, did not vote to approve or deny the new rules, they automatically passed and will go into effect in mid-May unless legislators take action.

“Restricting to one charity per day per venue, rather than four, cuts (revenue) by 75 percent. Restricting from seven days to four days a week cuts it down another 40 percent,” said Dane Nickols, treasurer of the Michigan Charitable Gaming Association and a member of the Lions Club in Laingsburg, located between Lansing and Owosso.

Nickols said his Lions Club made $900 when it conducted its own millionaire party and that it makes about $3,350 at an established venue in Lansing.

He said the money comes in from outside of the community to help those in Laingsburg, which is better than petitioning local businesses and taking money from the community.

Gov. Rick Snyder signed over the regulation of millionaire parties to Michigan Gaming Control Board Executive Director Rick Kalm from the Michigan Bureau of State Lottery’s Charitable Gaming Division in June 2012 to enforce the Bingo Act and cut down on illegal activity.

Kalm said Michigan is the most liberal state, as it pertains to charitable gaming.

Since receiving the order, the MGCB has shut down 22 venues for illegal gambling; 31 locations still function now, Kalm said. He added that he could not name one location that did not have a past violation of the Bingo Act.

“When we first took over, there were 78 or 79. A lot of them consolidated or closed on their own once we started looking at them,” he said. “It was pretty apparent to us the current form was not working at all.”

The largest example of illegal activity in the state, he said, was Snookers’ Poker Room in Utica. He said the owner and manager remotely reduced the amount of chips sold from other locations when sales approached the allowed $15,000 per charity.

He said the Michigan Gaming Control Board conducted an emergency shutdown of the operation by denying charities their licenses, and the prosecutor charged the owner and a manager with misdemeanors. The owner and manager received $500 fines and two months probation on Nov. 26, 2013, for violating the Bingo Act and being unqualified participants in charitable gaming, according to 41-A District Court records.

Kalm said he wants to shift millionaire parties to local bowling alleys, restaurants and bars, because the law specifically outlines that charitable gaming must be a secondary function of locations. At many locations, charitable gaming is their primary source of income.

“One (location) was doing nine charities at $15,000 (chip sales) each, so you can see the scope of how much cash was moving through locations with no background checks, no surveillance, no regulation,” he said. “The monopoly poker rooms have is really what’s causing the problem.”

He added that 14 new suppliers applied to accommodate charities’ needs at community locations, and that the Michigan Gaming Control Board will conduct background checks on all dealers in order to regulate charitable gaming.

Senate bill 878, which passed unanimously April 24, would alleviate some of the restrictions and allow poker rooms to continue to operate.

At press time, the House Regulatory Reform Committee planned to consider the bill May 14.

“If it comes out of the committee, then it will be up to the House majority leader and House speaker to bring it to the floor,” Nickols said. “We’re concerned, obviously, that there will be some resistance there in not getting it to the floor.”

Kalm said Senate bill 878 goes against everything he is trying to do.

Lisa Baratta, the general manager of a large charity poker lounge in Shelby Township called The River, said she’s been running the business since July 2011.

Currently, she said her business and charities make about $4,000 per four-day event, running from 2 p.m.-2 a.m. and splitting revenue 50-50.

The River is a location, not a supplier, so it would be able to make $250 in rent per charity, plus the cost of food and beverages, under the new rules.

“When we first opened up, we were allowed to have an unlimited amount of charities. We got ourselves up to six charities per day; then in October of 2013, the Gaming Control Board cut us back to three without really any reason,” she said.

She said that if legislation does not pass in the House, the rules would go into effect May 15 and likely cause The River to close its doors.

“In a state like Michigan, where the economy is not necessarily thriving, to make a successful business close down is unacceptable,” Barrata said. “This is a win-win because I’m employing people, I have lots of vendors, I pay taxes through the state and charities are making a lot of money for those who need it.”

Kalm said the rules would hold charities more accountable and responsible for an explosion of unregulated activity that had become a problem.

If the rules go into effect, he said he believed millionaire parties would become more popular at bowling alleys, bars and restaurants, and that charities would just have to do a little more research to hire a supplier.

You can reach C & G Staff Writer Sarah Wojcik at swojcik@candgnews.com or at (586)498-1029.