Editor's note: In 2001, West Virginia lawmakers set out to control illegal gambling by creating a state-run industry that allowed bars, restaurants and fraternal organizations to operate video lottery machines. Despite its detractors, the Limited Video Lottery Act has been a financial windfall for the state and has created million-dollar mini-casinos across West Virginia. This is part two of a three-part report examining the industry.
HURRICANE, W.Va. -- Ordinarily, legislative lobbyists John Hodges and Christina Cameron Bright are plenty eager to talk. But not when it comes to MIR LLC, the limited liability company behind their growing empire of video poker clubs.
Hodges and Bright, whose clients include Nevada-based slot machine maker International Game Technology, have created 30 profitable video poker parlors across West Virginia.
With names like Mimi's, Patty's, Paula's and Sofia's, their clubs attracted gamblers who spent $62.4 million during the fiscal year that ended June 30, according to an Associated Press analysis of state Lottery Commission figures. That left MIR's owners with $9.6 million as their share of the revenue -- the largest amount for any of the state's 1,300 limited video lottery license holders.
Public records show William W. Service, a longtime Oregon restaurateur, helped Hodges and Bright launch MIR's parlors. Hodges and Bright amended MIR's paperwork with the secretary of state's office in November 2004 to remove Service as one of its officers. Lottery Commission officials say Service has since sold his ownership in the clubs to the two lobbyists.
MIR's growth can be traced to 2001 when the Legislature, at then-Gov. Bob Wise's urging, moved to restrict illegal gambling in West Virginia by creating a system of up to 9,000 limited video lottery machines that the state Lottery Commission would manage. The idea was to remove gambling machines from convenience stores and other visible locations and place them in bars, restaurants and fraternal organizations where access could be controlled.
With lawmakers expected to start a special session next week in Charleston, several say they will push to modify the law because the games have become too visible and operators have been able to take advantage of loopholes.
Low-key parlors
Unlike other parlors, which advertise with interstate billboards and bright colors, MIR's parlors are low-key.
In fact, visitors to a Putnam County shopping center might miss its crown jewel, tucked away between a nail salon and weight-loss clinic.
Mimi's at Liberty Square is an unassuming club with yellow walls, a row of small tables and a counter with a soda dispenser. But the draw isn't Mimi's 25-cent sodas, but its five limited video lottery machines just inside the front door.
On average, gamblers spent $1,839 on each machine every day of the last fiscal year. That added up to $3.3 million -- or $671,000 per machine, the highest amount of any video poker club in the state.
Per machine, six other Mimi's located in the Kanawha Valley were among the 10 highest grossing parlors in West Virginia last year, according to Lottery figures.
MIR management did not respond to Associated Press requests for an interview, and did not reply to a list of questions after requiring that they be submitted in writing. Office manager Lynn Smith hung up on a reporter last week.
MIR, however, is not the only chain in West Virginia. Nor is it alone at the top.
Though more than 1,300 different businesses, families or partnerships held one or more video lottery licenses last fiscal year, a mere 15 collected one-fifth of the $1.05 billion spent by gamblers. This handful commanded a similar share of the $173 million in profits, even though they held only 159 of the 1,969 licenses active during the year, and 796 of the 8,162 machines.
The other big winners are the 37 companies that own and lease machines to the bars, restaurants and parlors. These companies hold permits for 7,298 machines -- 89 percent of the total as of June 30 -- and take up to half of a retailer's profits as part of the leasing agreement.
But not everyone is making money.
Some struggle
Twenty-nine locations statewide reported zero gambling activity for at least part of the fiscal year. Another seven reported negative revenue, as gamblers won more than what they spent.
All told, 554 locations earned a retailer-distributor share of $25,000 or less.
Other retailers are getting by, but not getting rich.
Lillian Burns owns the Pfost Office Lounge, a tiny video poker bar in Bruceton Mills. Gamblers spent $225,000 on her machines last year, leaving her -- on paper -- with a $53,500 cut.
Burns says she shares that with the operator who leases her the machines and with her landlord. In the end, about 12 percent of the profits remained in her hands. So far, it's been just enough to pay the rent.
"Yesterday, I made $300," she says. "A few days ago, I was $5,000 in the hole."
In part, she blames a competing club about 3 miles up the road. The yellow sign out front says Crazy Charlie's, but the business is incorporated as a member of the Order of the Orioles.
Critics say such clubs are exploiting an apparent loophole in the Limited Video Lottery Act, which allowed nonprofit groups to have up to 10 machines, double the number that for-profit retailers can operate.
"They're fake!" Burns says of newfound fraternals like the Orioles. "Become an American Legion or something. Do it right."
Fraternal groups
In July the Lottery Commission voted to require nonprofit groups to bear the name of their fraternal organization on signs, but Burns says the state should go further.
Either remove the machines "or else make them prove they're giving 51 percent of the profits to charity," she says. "And show what charity."
Charlie Lewis manages the Crazy Charlie's in Bruceton Mills and one in nearby Terra Alta. He says he partnered with the Orioles, founded in 1910, so they could raise revenue for charity work and he could offer more machines.
"The two here were formed to try to do things in the community," he says. "That's the way the law was written. We're abiding by the rules just like everybody else."
Dennis Wilhelm, president of the Terra Alta nest, says he understands smaller clubs "feel we're doing something wrong."
"But we're just getting started," he says, "and we want to do some good."
In Charleston, city officials are challenging another fraternal with 10 machines, The Hot Spot Cafe.
Its owners, Nancy R. Stumpo and David G. Carpenter of Clarksburg, have 11 clubs statewide, most under the same name. Last fiscal year, gamblers spent $17.9 million in their clubs. That yielded $2.86 million in profits.
The Hot Spot in Charleston, chartered as the Fraternal Order of the Owls, remains open while it appeals a zoning board ruling that it illegally opened within 2,000 feet of a pre-existing video lottery location.
archive