
DATE: Wednesday, October 1, 1997            TAG: 9710010458

SECTION: FRONT                   PAGE: A1   EDITION: FINAL 

SOURCE: BY JUNE ARNEY AND MATTHEW DOLAN 

        STAFF WRITERS  

DATELINE: CHESAPEAKE                        LENGTH:  214 lines

BINGO FRAUD RAMPANT, WITNESSES SAY EX-YOUTH LEAGUE MANAGER GUILTY ON 2 TO 10 CHARGES

Former youth league bingo manager George West on Tuesday was convicted on two of 10 charges that he took part in a scheme to divert hundreds of thousands of dollars from Deep Creek Baseball Association bingo games.

The two-day trial raised questions about how widespread the practice of paying ``volunteer'' bingo workers is - a practice that diverts money from charitable good works to other, sometimes illegal, purposes.

Seven people testified at West's trial that workers at bingo games sponsored by the youth association were paid for their services, which is forbidden by state law.

And that practice is not unique to the Chesapeake bingo games, say officials who regulate the games in Virginia. In fact, it might be only the tip of the iceberg of improper compensation of workers and bingo association members, according to the Virginia Charitable Gaming Commission.

Hundreds of thousands of dollars have been given to members of bingo organizations and ``volunteer'' workers at the games for things such as golf tournament fees, IRS payments, scholarships for bingo organization members' children, and life and health insurance, according to a document provided by commission chairman Edward J. Fuhr.

Jerry Rowe, the commission's executive director, said Tuesday that several organizations statewide are under investigation for paying volunteers to work at bingo games. Rowe would not name the organizations or give details, but he said fewer than five are targeted.

West's conviction - the second-largest bingo fraud conviction in state history - was an outcome that seemed to satisfy prosecutors and the defense. He was found guilty of one felony and one misdemeanor.

``The only thing I've got to say is that it came out the way we wanted,'' said West, 52, his voice cracking. ``At least they know they're all getting paid - the money did not go to my pocket.''

``We're happy,'' said prosecutor Russ Stone of the state attorney general's office. ``The gambling charge covers all the evidence we presented.''

Circuit Court Judges S. Bernard Goodwyn convicted West of running an illegal gambling operation, a felony, and of winning by cheating. The judge dismissed seven counts of embezzlement and one count of conspiracy to embezzle.

West, scheduled for sentencing on Nov. 20, faces up to 10 years in prison and up to a $20,000 fine for conducting an illegal gambling operation. He also faces a fine of between five and 10 times the amount of winnings on the other charge, a misdemeanor.

Danny Moore, president of the Deep Creek Baseball Association, said he had mixed emotions about the trial results.

``We're disappointed that the other charges were dropped, but that's why we have the system we have,'' he said.

The group has filed a multimillion-dollar civil lawsuit against West, four other individuals and Frank Moran and Sons, a Maryland bingo supplier, claiming they embezzled more than $1 million from their program.

One defendant accused in the scheme to divert hundreds of thousands of dollars from Deep Creek remains to be prosecuted in criminal court. Rogelio Legarda is expected to plead guilty Oct. 10 to a misdemeanor of cheating. In exchange, prosecutors are expected to not pursue a felony count of conspiring to embezzle.

Testifying on his own behalf, West said workers have been paid ever since he first arrived as bingo manager.

``All workers who worked bingo got paid,'' he testified. ``All your commercial halls are getting paid.''

West said workers received $50 for each five-hour session, bingo callers received $60, and as manager, he was paid $75. He estimated that those salaries cost about $54,000 between February 1996 and February 1997.

``We knew it was wrong,'' he testified. ``I'm not saying I didn't know it was wrong.''

A half-dozen other witnesses testified that they received payment for working Deep Creek bingo. Each said that they knew they faced possible investigation by the IRS and the possibility of back taxes as a result of their testimony.

Those workers also could face punishment for their admission that they were paid. Giving or receiving payment for working bingo is a misdemeanor punishable by up to a year in jail, a fine of up to $2,500, or both.

One of those witnesses, Carolyn Darlene Ferguson, testified that she had been involved with Deep Creek bingo for about eight years and was paid for her work even before West became bingo manager. She said she was glad to be able to admit the payment.

``For so long we've been told, `Don't say you're being paid,' '' she testified. ``It's a relief to finally have it out in the open. . . . It's not fair for him to have to go through this when we were paid before him.''

Also at issue in the trial was whether any Deep Creek officials knew of the practice of paying workers.

Donald Gwaltney, former bingo trustee for the organization, testified Monday that he did not know about the payments. But on Tuesday, several of the workers who said they'd been paid testified that Gwaltney was present when cash payments were made. Some said Gwaltney tried to get them to sign a piece of paper saying they had not been paid.

West testified that when he first talked with Gwaltney about running the games, he asked Gwaltney whether Deep Creek could get enough volunteers to be successful.

``I told him there was another way to run it,'' West testified. ``We could pay the workers, and I guaranteed we'd make money at it. . . . They were all compensated from day one.''

Moore, the league president, testified Monday that he did not know about the practice of paying workers. He said the board of trustees never authorized such payment.

On Tuesday, West admitted that he bought instant tickets with off-the-books money, then sold them and used the money to pay workers. Except for those payments, he said, all the money from the tickets was turned over to Deep Creek, he testified. He denied giving Legarda advance information about winning instant tickets.

When the Virginia Charitable Gaming Commission took over, ``we had no way to cover up paying the workers,'' West testified. ``We had to do things like this.''

Gaming commission officials, who conducted the investigation that led to the charges, have said all along that the baseball association is not to blame for the embezzlement - it was a victim.

Two people involved in the bingo scheme already have entered guilty pleas.

Jeffrey G. Moran, vice president of Baltimore-based bingo supplier Frank Moran and Sons, was convicted Sept. 11 of falsifying a gaming invoice. He was ordered to pay restitution of $24,310 to Deep Creek Baseball Association and was given a 12-month suspended sentence.

Keith H. Ward, 64, of Chesapeake, a former employee of Moran and Sons, pleaded guilty last week to falsifying documents submitted to a state agency. He was sentenced to six months in jail, all suspended, with no fine.

Originally charged with embezzlement, a felony, both Moran and Ward pleaded guilty to misdemeanor charges. Both men testified for the prosecution on Monday.

The Deep Creek bingo games are not the only Hampton Roads games that have received state scrutiny.

Two other operations - Cradock Little League in Portsmouth and Suffolk Reiners 4-H - were both named by the commission on a recent list of 10 organizations that engaged in ``disallowed use of proceeds.''

In a Sept. 23 document culled from the audits of bingo organizations, the commission found that Cradock allocated $23,400 as a set-aside for IRS charges for paying bingo workers during the fiscal year ending Sept. 30, 1996.

Richard Posey, a representative of the Cradock youth baseball organization, said Tuesday night that he would not comment on that report.

The list also stated that the Suffolk 4-H organization improperly spent $1,183 from bingo proceeds for scholarships for members' children.

Sharyn Hughes, the club's leader, said her organization's inclusion on that list was not only incorrect, but misleading.

``We're not even playing bingo anymore, and the commission never told us we did anything wrong,'' Hughes said in an interview Tuesday. ``Plus, we used that money to send kids to camp, and we put that on our financial forms. That sounds like charity to me.''

The 4-H leader said her organization stopped playing bingo in December 1996. And Hughes said the children, not the parents, are the members of the organization.

The game, Hughes said, was not reaping the promised money to help support the youth organization for more than 30 children in Chesapeake, Portsmouth and Suffolk. The organization sponsored games for about two years.

``We found that bingo, after all the regulations and taxes, was just not worth the effort. . . . You had to find the volunteers, and we couldn't even get out of our contract until the end of the year,'' said Hughes, who said fund raising has become more difficult since the bingo games ended.

Although the commission considers the Suffolk and Cradock organizations' actions to be improper use of funds that are meant for charity, other states have different standards.

A key issue for states' regulators is: Do you pay competent employees in the hopes of running an honest game, or do you keep the employees as volunteers in order to put more money into the organization's charitable purposes?

The state commission is currently finishing work on permanent bingo regulations, due by the end of the year. Under current interim regulations, volunteers may not be paid for their work at bingo games. But they are allowed to receive food and non-alcoholic drinks worth up to $5 per session. Volunteers who work a bingo game may also play, provided they are identified as such by the caller.

Also, individuals who are not members of an organization or members who do not participate in the games may be paid a ``reasonable fee'' for preparation of financial reports, the regulations state.

The idea of barring members of an organization from benefiting financially from bingo is not new. When charity bingo was first legalized by Virginia in 1973, no part of the games' gross receipts could directly or indirectly benefit any member or employee of the charitable organization.

While Virginia looks to keep bingo employees unpaid, but with a small meal stipend, Rowe said he believes only a few states, such as Nebraska and North Dakota, allow bingo workers to be paid. Workers on military installations also can be paid.

``It has been the overwhelming feeling of the commissioners, and the people who have appeared at our hearings, that it is a recipe for disaster if you allowed employees to be paid,'' said commission chairman Fuhr.

``You don't want to see organizations throwing a bunch of money to pay employees rather than for their charitable purpose,'' he said. ``I think (Tuesday's conviction) reinforces the commisioners' resolve that there ought not be paid employees.''

But Pam Perri, executive director of the National Association of Fundraising Ticket Manufacturers, said she knew that other states, including Minnesota, Washington and Louisiana, allowed paid workers to staff bingo games. And Perri thinks that will increase the yields in those states.

``I think that most legislatures view charitable gambling as a church operation, and in reality, charitable gambling is big business and it's a cash business,'' she said. ``In order for them to survive, they need to compete with the most professional operation possible.''

Having paid employees, Perri said, helps organizations compete in a marketplace filled with pari-mutuel betting and other forms of gambling like lotteries. ILLUSTRATION: [Color Photo]

IAN MARTIN/The Virginian-Pilot

AT STAKE

The trial: George West was found guilty of running an illegal

gambling operation and of winning by cheating. Embezzlement and

conspiracy counts were dismissed. He faces up to 10 years in prison

and up to a $20,000 fine, as well as a fine of five to 10 times the

amount of his winnings.

The big picture: The trial raised questions about how widespread the

practice of paying ``volunteer'' bingo workers is - a practice that

diverts money from charitable good works to other, sometimes illegal

purposes.

The law: A state commission is currently finishing work on permanent