Attorney General Mike DeWine...
DeWine Joins Prosecutor Mason to Announce Internet Café Indictments
About Internet Cafes… from the Cleveland Plain Dealer 

(CLEVELAND)— Ohio Attorney General Mike DeWine joined Cuyahoga County Prosecutor Bill Mason today to announce indictments involving alleged illegal activity at internet cafés in the Cleveland area. 

“We are working hard with partners like Prosecutor Mason to crack down on illegal internet cafes in Ohio,” said Attorney General DeWine.  “These businesses, hundreds across Ohio, are totally unregulated and can be a real consumer rip-off.” 

Ten individuals and seven companies were indicted on one count of engaging in a criminal enterprise, a first degree felony. Several of the defendants were also charged with conspiracy, gambling, and money laundering. 

The Ohio Attorney General’s Bureau of Criminal Investigation (BCI) helped assist in the investigation, led by Prosecutor Mason’s office, and also included the Ohio Department of Public Safety’s Ohio Investigative Unit, the Parma Heights Police Department, U.S. Postal Inspectors, and the U.S. Secret Service. 

“The end result is exactly what the members of the criminal enterprise intended – a complicated and elaborate, layered web of related companies dispersing and distributing money to each other with hopes of never being caught,” Prosecutor Mason said. “The days of gambling with the law have come to a screeching halt.” 

Cleveland Plain Dealer...

Internet cafes keep popping up, but are they gambling or not?

By Mark Gillispie, The Plain Dealer

Monday, May 30, 2011, 5:53 AM 

BEDFORD, Ohio -- On a soggy spring afternoon, Evone Campbell pulled into the last open parking space at a small strip center on Broadway Avenue in Bedford, eager to play slot machine games at an Internet sweepstakes cafe. 

Campbell, 53, said she plays sweepstakes games three or four times a week, limiting herself to spending no more than $40 each visit. 

“I only play when I have some extra cash,” she said, adding that some of her friends spend as much as $200 on a single visit. 

Asked to compare play at sweepstakes cafes with what she has experienced at out-of-state casinos, the Maple Heights resident shrugged. 

“It’s like any other gambling,” she said. 

Supporters of the Internet sweepstakes industry beg to differ. They argue that it’s not gambling at all, but are sweepstakes like those offered by fast-food restaurants. They say there is nothing in Ohio law prohibiting sweepstakes and that the games are free promotions given in exchange for buying Internet time or phone cards. 

Critics counter that if people spend money to buy products they don’t need for a chance to play the games, then it must be gambling. 

More about Internet cafes 

The Ohio General Assembly has begun deliberating how the state should regulate sweepstakes games, a move that could give legitimacy to this controversial but burgeoning industry. 

How many sweepstakes cafes are in Ohio is unclear. Attorney General Mike DeWine has estimated over 100. At last count, more than 24 were open in Cuyahoga County and a sizable number in surrounding counties. 

Nationwide, it’s been estimated that Internet sweepstakes cafes could be a billion-dollar industry. Popular in southern states, Ohio has become a hot spot for entrepreneurs looking to get into the business. 

James Mecham runs a Sacramento, Calif., company that has helped people set up Internet sweepstakes cafes in Ohio. He said the success operators have had here has created a “positive feedback loop” for the industry in Ohio. 

Mecham has said gross revenue can range from $1,000 to $5,000 a month for each computer terminal in a sweepstakes cafe. In Greater Cleveland, cafes typically have 40 or more terminals. 

“If you do it well, they can be extremely lucrative,” Mecham said. 

Prizes are predetermined 

It’s easy to understand how someone might think sweepstakes games are gambling. While the cafes don’t have the stand-alone slot machines seen in casinos, the computer games in sweepstakes cafes look and sound like the slots, video poker and video Keno games at casinos. 

Instead of feeding cash into machines, sweepstakes customers buy Internet time that can cost as much as 25 cents a minute or phone cards and given magnetic swipe cards loaded with sweepstakes points. A $20 purchase comes with 2,000 sweepstakes points that can be used to play games that cost from eight points for a spin or video poker hand to as much as 2,000 points. The more points a person puts in play, the bigger the potential prize. 

Points accumulated for winning spins can be used to continue playing games or can be redeemed for cash. 

What makes the business legal, supporters say, is that there are a predetermined number of winning entries paid out over a finite period. Once all of the prizes are paid out, a new sweepstakes period begins. 

It is up to sweepstakes operators and the game software providers, who are paid a percentage of a cafe’s net profits, to determine the number and the amount of prizes offered. 

The slots and poker games are merely an entertaining way for people to find out if they have won a prize, said Roy Fankhauser, whose Elyria-based Ohio Vending Machines & Entertainment Inc. is testing new sweepstakes software at a cafe in Willowick. Customers have no affect on the games because the prizes have been predetermined, he said. 

People can let the computer reveal whether they have won a prize, instead of playing the games, Fankhauser said. 

“You really have a room full of nothing, a computer network that displays graphic interfaces,” he said. “You’re not playing games. All you’re doing is revealing those sweepstakes entries.” 

Yet there are plenty of people, including DeWine, who think sweepstakes are illegal games of chance. The phone cards and expensive Internet time that cafes sell hold little value other than to allow sweepstakes operators to exploit loopholes in Ohio’s gambling laws, critics contend. 

DeWine said in an interview that few people use the phone cards or Internet time, which makes the product secondary to the games. 

“You go in and buy a Big Mac, you’re buying a Big Mac,” DeWine said. “You may get a little scratch off thing and it might be fun, but it’s incidental to buying your Big Mac. That’s not true when you walk into these so-called Internet cafes. There’s only one reason they walk in and that’s to gamble.” 

Taking away ‘people’s enjoyment’? 

The state legislature, at DeWine’s urging, is seeking to regulate sweepstakes cafes instead of banning them. DeWine said regulations would likely survive a court challenge while an outright ban might not. 

The proposed law calls for the new Casino Control Commission to establish rules for sweepstakes games and to certify computer equipment. But the law also forbids the payment of cash prizes, limits locations to just five computer terminals and allows individual cities to stop sweepstakes cafes from opening... 

Read the rest of this article at the Cleveland Plain Dealer