Another Veterans Charity Scandal from Florida: Nonprofit Internet Sweepstakes Cafes

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December 11, 2011; Source: Tampa TribuneOnce again, Dan Borochoff of the American Institute of Philanthropy has done the kind of nonprofit accountability research that reveals things that the public should really know about when figuring out what kind of nonprofits they might support. It appears that local government officials in Hillsborough and Seminole counties in Florida have been investigating a group called Allied Veterans of the World & Affiliates, and Borochoff has added some important analysis as to what’s wrong with this group. To us, it is a mix of a few distinctly odious themes that we have seen before in the nonprofit sector:

  • yet another “nonprofit” hiding behind the façade of claiming to help veterans
  • the often corrupting element of gambling
  • the absence of proactive state government charity oversight

This Allied Veterans group is a nonprofit but it doesn’t seem to deliver much assistance to veterans. The 40 affiliates of Allied Veterans run nonprofit “sweepstakes cafés” that allow customers to play Las Vegas style video slot games—but outside of the state’s regulation of gambling. Two counties have gone after this group for its cafes, which the organization says offer sweepstakes games much like those offered by McDonald’s and Coca-Cola.

The Tampa Tribune visited two of the Allied Veterans nonprofit Internet cafés in Hillsborough County. The description sounds more like the old seedy “Off-Track Betting” rooms in New York City than an Internet café that offers customers “printing, faxing and copier services,” and computer seminars: “Affiliate No. 83 on Fowler Avenue is a stand-alone building in a strip mall with dark, mirrorlike tint on the windows and a security guard by the front counter. Affiliate No. 87 in the Northpoint Crossing Shopping Center on Fletcher Avenue has about 50 computers encased in black cabinets lining the walls and arranged in rows in the middle of the room. On Tuesday afternoon, a lone customer sat in front of a computer, clicking a mouse while images similar to Las Vegas-style video slots flashed onscreen.”

It’s no surprise. An earlier iteration of this group was a multi-site bingo operation, which switched to running sweepstakes cafés under the new leadership. According to Borochoff, the administrative arm of Allied Veterans said its 2010 revenue was $2.4 million, but it doesn’t include the money that the 40 affiliates took in. He said that the organization’s affiliates “appear to be set up in a way ‘to get around the gambling rules and requirements’ . . . [creating] a false sense of comfort for people to participate in gambling and think, ‘If I lose money, it’s helping veterans.'” The CEO who made the conversion from bingo games to sweepstakes cafés was paid a salary of $345,000 in 2008; the current CEO was paid $211,000 last year.

The Tribune noted that a spokesperson for the state’s Department of Veterans Affairs reports no direct interactions with Allied Veterans. Oddly, the article never mentions the state’s official unit that purportedly oversees and regulates charities. This group has been operating these OTB-like cafés in low-income neighborhoods for several years now. It appears that it has evaded charitable oversight and gambling oversight but for the interest of county and municipal authorities. Shouldn’t the state have been all over this group, especially since Florida has been the epicenter of one of the worst veteran charity scandals ever, the U.S. Navy Veterans Association (which we have covered here and here)?—Rick Cohen