Cash out, or else

The H&P Business Centre in a strip mall in Winchester has been operating since November. Owner Barry Cummings emphasized in an interview several weeks ago that it is a "business center. That's exactly what we do."

"We sell office supplies," he said, waving at a couple of small shelves of scissors and note paper inside the kiosk in the middle of the store. "We sell faxes, we make copies," he added and there, right beside him, was a small office copier.

"We also sell internet time. You can go on the internet and you can surf the web, you can check your email, and you can do school work." About the half the floor space was taken up with about 24 computer-equipped cubicles; the rest was empty. The place smelled of cigarette smoke. There were only a couple of customers.

"Or," Cummings continued, "you can go online and play one of our fun online games." Each computer has word-processing and spreadsheet software, connects to the printer, or lets customers play one of 24 video slot machine or poker-type games with names like "Captain Cash" and "Super Bonus Kangaroo Keno," along with a variety of video poker and slot-type games.

Customers who buy "points" ($5 buys 500 points) at the back desk can spend them either using time on the internet or playing the games. When you sign up (photo ID required), H&P gives you 500 "free" points. Free coffee is available.

Two signs on the office window, where customers purchase points, ask them not to say, "I want to cash out." The correct phrase at H&P is "redeem my points."

Also in the store was a large banner, "SWEEPSTAKES." And on the pillars out front were posters advising passers-by that H&P offers "20 CHANCES TO WIN $500 EVERYDAY."

Gambling is illegal in Virginia (if you don't count state lotteries), yet H&P and dozens of other operators around the state seem to be operating what critics might call strip mall casinos. For months "sweepstakes cafés" and convenience stores that offer similar online computer games have been waiting to see whether state authorities would prosecute, but it was not clear that what H&P was doing actually violates state law.

On Monday the Senate passed legislation intended to clarify that issue; the House passed a similar bill last month. If Gov. Bob McDonnell signs the legislation, state authorities will then have to decide if and how to prosecute the dozens of businesses, from Winchester to Roanoke to Hampton, now operating in the state. Business owners will have to decide whether to fight the legislation in court or cash out.

Here's the background: Internet sweepstakes cafés and similar operations haven't been around long, but North Carolina has seen enough. That state's legislature outlawed them effective Dec. 1, pushing some operators into Virginia. At least a dozen Virginia communities, from Front Royal to Roanoke to Hampton, already have such businesses.

Some local authorities objected. In Virginia Beach in September, for example, mask-wearing police raided about a dozen such establishments and confiscated hundreds of computers authorities suspected of being used for illegal gambling, reported the Virginian-Pilot. No one was arrested, but in December a grand jury indicted the owners of 10 businesses on criminal charges of illegal gambling. Also in December the Pittsylvania County Sheriff's Office raided three Internet sweepstakes cafés.

H&P was quiet when WORLD visited, but such operations are often busy and very profitable. According to the Fredericksburg Freelance-Star, the Spotsylvania Commonwealth's Attorney last year shut down the games at a local tobacco store. AKA Tobacco unsuccessfully sued and in the process revealed that it made $1.5 million on the games in less than a year.

Sweepstakes operators cite a July 30 opinion issued by Virginia Attorney General Ken Cuccinilli's office. Responding to a question about a hypothetical operation that sold internet access time and other business services while running a sweepstakes game, the Attorney General opined that such a practice would, in fact, be legal. Virginia law states that sweepstakes and similar promotions are legal if you can win without buying anything and if there is an equal chance of winning for all entrants, regardless of whether a player made a purchase.

But the Attorney General changed his tune on Oct. 15, in response to a request from State Senator Edward Houck. He asked about hypothetical situations in which customers got a "free spin" and the customer buys and discards long-distance phone cards or received "computer internet rental time worth $5, but the internet time is rarely used by customers, except to play a 'sweepstakes' game over the internet."

In that situation, concluded Cuccinelli, where the "product" is of no interest to the consumer, it would be illegal. If, he said, citing a Texas precedent, "the main purpose and function of the machines, and the business, was to induce people to play the game, agreeing to gain or lose something of value at least partially by chance," then it is an "attempt to legitimize an illegal gambling device" and a "mere subterfuge."

Bills to clarify exactly what is legal were introduced last month. Cuccinelli stated they "will provide clarification as well as a solid affirmation that this form of gambling has always constituted illegal gambling, and is subject to prosecution under existing Virginia law."

The bill, according to its official summary, "Amends the definition of 'illegal gambling' to clarify that the purchase of a product or other thing of value (e.g., phone card, Internet time), which purchase credits the purchaser with free points or other measurable units that may be risked by the purchaser for an opportunity to win money, is deemed consideration for the purposes of illegal gambling. . . . The bill provides that it is declaratory of existing law."

Said Republican Sen. Mark Obenshain: "These stores are introducing video gambling to Virginia under the guise of operating legal sweepstakes. Everyone sees through the gaming industry's ruse, and Senate Bill 1195 will make clear that casino gambling is neither welcome nor legal in Virginia."

"A major injustice has been done against my rights, and this is a travesty for all business owners in the Virginia Beach market," Daniel Storie, who owns four cafes in Virginia Beach, told the Virginian-Pilot in December after the indictments were handed down. "We have not stopped fighting since day one, and we plan on fighting the whole way."

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