DATE: Saturday, November 22, 1997           TAG: 9711220373

SECTION: FRONT                   PAGE: A1   EDITION: FINAL 

SOURCE: BY JUNE ARNEY AND MATTHEW DOLAN, STAFF WRITERS 

DATELINE: CHESAPEAKE                        LENGTH:  152 lines

YOUTH LEAGUE'S IRS WOES RISINGDEEP CREEK BASEBALL ASSOCIATION OWES $500,000 IN TAXES AND FINES, AGENCY SAYS.

First, the Deep Creek Baseball Association fell victim to a quarter-million-dollar gambling scheme run by its bingo manager.

Now, the Internal Revenue Service is demanding that the nonprofit youth league pay more than half a million dollars in back taxes and penalties, and it is threatening to revoke the group's tax-exempt status.

Officials at the youth league said their organization can't afford to pay the entire sum demanded by the IRS and that loss of tax-exempt status would eventually shut down the league, which has 50 teams serving 600 children.

The IRS action comes at a time when league officials say bingo revenues are rising and the group is using a larger percentage of that money for activities to benefit kids.

``The IRS wants to close us down,'' said John Conroy, Deep Creek's bingo trustee.

The IRS demand is a direct result of the league's illegal gambling operation, run by its former bingo manager George West. Problems included sales of instant bingo tickets purchased off the books, and giving winning ticket numbers to a player in advance. Workers, required by law to volunteer their time, were being paid to staff the games.

The IRS action is further evidence of widespread problems with charitable bingo in Hampton Roads:

This week, the Virginia Charitable Gaming Commission searched the home of a Portsmouth man in an investigation of alleged embezzlement and illegal gambling at a now-defunct Hampton bingo hall. No charges have been filed in that case.

In early November, a grand jury issued embezzlement indictments against a former volunteer worker at bingo games operated by the Virginia Beach chapter of the Fraternal Order of Police. The indictments allege that she skimmed more than $1,000 from the coffers of the Virginia Beach FOP.

On Thursday, West was sentenced to a year in jail, fined $10,000, and ordered to stay away from bingo operations for three years. Three other people have been convicted for their involvement in illegal activity at the Deep Creek Baseball Association's bingo games.

Those convictions followed an IRS investigation into the Deep Creek league's finances.

The Internal Revenue Service demanded more than $100,000 in back taxes from the organization before the West conviction. ``But after West was convicted, they wanted to open all the records for the years West worked here,'' Conroy said.

The IRS raised its demand to more than $500,000 in unpaid taxes and penalties and revocation of tax-exempt status after West's conviction, Conroy said.

Martin J. Ganderson, one of the baseball league's lawyers, declined to comment on the recent IRS action. Officials at the IRS did not return phone calls on Friday but routinely do not comment on pending investigations.

Deep Creek Baseball has since filed a civil suit against West and others, alleging that they embezzled more than $1 million from the Deep Creek program.

Baseball league officials, including its accountant, Terry Shapiro, say the organization has boosted its bingo earnings, and its charitable spending, since West's departure in February 1997.

During the fiscal year ending Sept. 30, 1996, Deep Creek's charitable gambling enterprise pulled in over $1.3 million in gross revenues. After prizes and expenses, the organization spent about $28,400 - or 2 percent of the total - on its approved charitable activities.

In the next fiscal year, the organization boosted its revenues to $1.4 million and drastically increased the amount of money it spent on its charitable purpose. It spent $129,000 on league activities, more than 9 percent of its total revenue, according to the organization's records.

That exceeds the 6 percent required by new state regulations for this last fiscal year.

Shapiro, the group's accountant, said she has encouraged the baseball league's board to spend more of its reserve money rather than saving it in a checking account.

``They are not going to have a huge bank account anymore, earning interest,'' said Shapiro, who reviews the financial records for 10 bingo organizations in Hampton Roads.

She believes that awarding prizes and paying expenses - including high rents at commercial halls - should total about 85 percent. That would leave 15 percent - more than any current state standard - for charity.

``We have set up a CD for buying land,'' said John Conroy, Deep Creek's bingo trustee. ``That counts for our charitable purpose, and we'll use the money to buy land or upgrade fields.''

On Thursday night - only hours after West's sentencing - Deep Creek Baseball's bingo games were in full swing, with more than 400 players at Brentwood Hall on North George Washington Highway.

The semiweekly games pack in players, despite the recent convictions of West and others for illegal activity. Volunteers who are now running the bingo games emphasize that everything is being done by the rules.

``Nobody pays me,'' was a common refrain among the volunteers, as they scurried around the hall attending to players, who were quiet and concentrating on the games.

Near the entrance to the bingo hall, Camerly Charlton, 35, kept the players supplied with fluorescent daubers - thick, colorful markers - all the glitter dust and magic potion they might need to bring luck to their games. The glitter, or the oil, is applied to game cards or on particular squares for luck.

Charlton operates her business, C&C Novelty; proceeds are separate from the charitable gaming.

Typically, her sales for the night run about $100 to $150. Regular daubers go for $1, with fancy glitter daubers for $2.25. Charlton fills any bingo need at her shop with supplies - bingo trolls, lighters, keychains, ash trays and license plate brackets that say: ``Happiness is screaming bingo.''

Nearby, Phil Miller, a Chesapeake sheriff's deputy who works the bingo hall as a part-time job, stations himself where he can watch the players - a job he says he loves.

``Some of the older people, when they yell, `Bingo,' yell louder than the young people,'' Miller said. ``They really let it sing out.''

He can tell some of the players are getting close to bingo when he sees them reach out for their lucky charms - often fat little trolls with long, colorful hair.

``You see them start rubbing their troll dolls' hair,'' he said.

Many of the players said they knew about West's sentencing for illegal activity earlier on Thursday.

Theresa Hunt, 38, of Portsmouth, has been coming to Brentwood Hall for about 10 years, but stopped for a while during the height of the West controversy. She plays instant bingo and wanted to go to a hall where she knew the games were run fairly and legally, she said.

``We know we aren't going to get rich here, but I want to play somewhere where I have a fair chance,'' she said, dabbing her bingo cards with a blue marker.

Hunt doesn't want to reveal how much money she spends on instant tickets a session, but she admits she likes them. ``Sometimes, I win more money on instants than bingoing,'' she said.

She still doesn't want to believe that allegations against West and others are true. ``As far as George was a person, I thought he was a friend,'' she said. ``I can't believe he would take my money.''

Elizabeth Bailey, 60, of Portsmouth, said she, too, was surprised by the revelations about Deep Creek bingo. ``But I started watching who was winning, and I thought there was something rotten in Denmark,'' she said. ``I spend four or five nights a week in bingo halls. It starts worrying you. If it's a scam, then it could be a scam somewhere else.''

Conroy, the bingo trustee, said West's criminal mismanagement was not entirely to blame for the low levels of money spent on the league. The organization is learning to spend its profits responsibly, he said while typing the day's bingo figures into a new spreadsheet program.

Still, the organization has new legal and financial challenges.

Conroy said the organization has spent tens of thousands of dollars in legal fees fighting the federal government over the tax bill. ``This is what is really hurting the kids now,'' Conroy said. ``We would be building ballfields if the IRS wasn't forcing us to pay a lawyer to fight them.'' ILLUSTRATION: Color Photo

Above, Mary Hughes....

Tracy Rigdon...

Graphic/VP

Deep Creek Baseball Association Charitable Gambling Activity

[details cash received, operating cost, no. games per year, average

profit or loss per game for years 1996 & 1997

For complete copy, see microfilm KEYWORDS: BINGO FRAUD

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