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Michigan Cracking Down on Charity Poker Games

Published by on August 4, 2013 – State regulators are cracking down on charity poker games, issuing stricter rules in response to problems with illegal gambling beyond state limits, liquor law violations and crimes at the events.

But poker room employees, players and charities contend the state is simply caving to pressure from Michigan’s casinos, which compete for poker players’ dollars. They say the move will hurt nonprofit fundraising, and will result in lost jobs for dealers and other poker room employees.

The state Bingo Act allows for “millionaire parties,” which allow nonprofit groups to raise funds by hosting casino-style games such as Texas Hold ’em and blackjack. The games have gained popularity in recent years with more than 40 permanent poker rooms that often offer food and alcoholic beverages. There has been a moratorium on new sites since January 2011.

Last year 2,525 active charities applied for licenses and brought in nearly $16 million.

The Michigan Gaming Control Board (MGCB) this week issued stricter interpretations of the rules governing the parties. MGCB Executive Director Richard Kalm said the board has not been asked by commercial casinos to act or react in any way.

Starting in September, poker rooms will be limited to hosting three charities per day with maximum chip sales of $45,000. Some poker rooms had been running six charities with chips sales of up to $90,000. Events also must be wrapped up by 12 a.m. instead of 2 a.m. Other rules govern tips, seed money and charity qualifications.

“Our intent is to limit large amounts of cash on hand and exposed, promote accurate record keeping, establish paper trail for subsequent audits, require the charities to be more engaged in the gaming operation,” Kalm said in an email.

The MGCB conducted more than 900 on-site visits and follow-up inspections of charities, resulting in nearly 300 violations, since the board took over regulatory control from the Lottery in June 2012. The state has suspended charities from conducting games at six venues due to liquor control violations, falsified records, under reporting of chip sales and other violations.

“There appears to be an inherent lack of internal controls at many events. Observations indicate lack of adequate security, proper record keeping, proper oversight of the gaming operations, and illegal non-charitable gambling,” Kalm said in a letter accompanying the new rules.

Kalm noted that from January 2010 through March 2013, there were at least four armed robberies, 47 assaults, three weapons offenses, 72 disorderly persons and 11 fraud cases at permanent poker rooms, not including several ongoing investigations. In 2009 a shotgun-wielding man was shot dead while attempting to rob a poker room in Burton.

The state needed to take a hard look at the poker room regulations, said James Nye, a consultant to Native American tribes in Michigan and Detroit casinos.

“We have a belief that these card rooms lack a necessary level of regulation for both the safety of the patrons, who go to these card games, as well as for necessary level of internal controls to insure the integrity of the games,” he said.

But Ed Sitek, a dealer at The River charity poker room in Shelby Township, was skeptical that the new rules are about public safety.

“(Gov. Rick) Snyder is trying to shut these down because the casinos are lobbying hard against it,” he said, adding that the number of crimes is relatively low for the number of poker rooms, and the state isn’t shutting down bars because of violence.

The River currently employs about 50 dealers and runs up to six charities at a time, so cutting that in half could result in losing at least 50 percent of the dealers as well as some wait staff. Existing workers would get their hours cut.

Sitek said the $15,000 chip sales limit as regulated by the state bingo act of 1972 is outdated, and that the figure should increase by inflation.

The restrictions will hurt charities too, said Donna Gartside, secretary of the Michigan Charitable Gaming Association.

“We’re frustrated, really frustrated, because the regulations are going to put organizations like the veterans and the sports boosters and the Lions Clubs, the Kiwanis, all of those they’re really going to hinder what they can do with charities,” she said.

Each charity is limited to $15,000 in chip sales. Charities and poker rooms take rake from each pot and split the proceeds after paying dealers. Charities must buy licenses for each fundraiser and can host up to 16 per year.

Charities brought in nearly $15.8 million from the games in 2012. That’s down from $19.2 million in fiscal year 2011, but up from $3.6 million in fiscal year 2004. Total revenues (split between player prizes, poker rooms and charities) reached $184.3 million last year.

A recent Bridge Magazine article on poker rooms pointed out that the three Detroit casinos reported $1.4 billion in revenue in 2012, and the Michigan Lottery generates about $700 million in net income.

Principal Linden Moore isn’t too concerned that the rules will hurt fundraising efforts for Montrose Alternative Education Center in Genesee County. The school can raise about $500 to $600 on a good night, and use the money to treat students to ice cream socials and help low-income students pay for caps and gowns.

“If they think that this is going to be the better route to take, then so be it,” Moore said. “I’m going to do what’s asked of me.”

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