AJCJ, Vol XV, NO. 2 (1991)

BINGO! Cheating and Legally Suspect Practices in One of North Carolina's Only Forms of Legalized Gambling

Dr. Robert Little* Assistant Professor

Department of Criminal Justice

University of North Carolina at Charlotte

Charlotte, North Carolina 28223

and

Major Douglas Freeman* Chief of Detectives

Onslow County Sheriff's Department Jacksonville, North

Carolina 28450

The order of authorship is not intended to reflect the level of contribution made by each author.

Abstract

Bingo is one of two legalized forms of gambling in the state of North Carolina. This paper is largely a product of information gleaned from an undercover police operation conducted by a special state task force constructed by the State Attorney General in 1983. The investigation concerned violation of state law designed to regulate bingo activity. This report provides the reader with the development of state law associated with bingo operations, and concentrates on the illegitimate methods used by professional operators to cheat bingo patrons. Legislation designed to crack-down on bingo abuse is discussed as well

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Gambling is one of the most controversial social activities yet one of the least studied forms of social behavior (King, 1985). Bingo is a specific form of legalized gambling which has received very little attention by social scientists. There have been, however, a few studies which address the characteristics and motivations of bingo players. For example, it has been suggested that bingo is primarily a female activity (Dixie, 1987). However, it has been found that motivations among male and female players differ. Females are motivated more by social contact with other players, whereas men are motivated more by a need for economic advancement (King, 1985). Although some studies exist on the characteristics of bingo players, there is a dearth of research on the operators of bingo games, particularly those operators who ply their trade in a legally suspect fashion. This paper focuses upon the legally suspect mechanisms utilized by some professionals who run bingo gambling operations.

The controversy over gambling often extends to state legislatures where lawmakers must wrestle with the question of whether or not to allow legalized gambling within their borders. On the one hand, advocates of legalized gambling cite potential advantages such as the creation of employment opportunities, its potential for enhancement of state revenues, the recreational value of such activity for consumers and the general enhancement of tourism within states having legalized gambling. On the other hand, critics of legalized gambling proclaim its evils such as the perceived relationship of gambling to organized crime, the belief that gambling breeds other social ills (e.g. theft or other crimes of economic desperation) and the belief that gambling can become a psychologically addictive disease which can contribute to individual and family impoverishment as well as community disorganization. North Carolina is one state in which the legislature has demonstrated strong resistance to the allowance of legalized gambling operations. Two exceptions exist, however. North Carolina allows two forms of legalized gambling, bingo games and raffles. This paper focuses upon bingo gambling operations.

The central thesis of this paper is bingo was originally legalized to provide tax-exempt, charitable organizations a means of revenue enhancement which would help fund their socially worthwhile endeavors. The legislative changes allowing this form of gambling, however, have created opportunities for professional game operators whose major motivation is personal economic enrichment (versus economic enhancement of charitable organizations). The personal economic enrichment motive is offered to account for the various forms of cheating which were observed in a special investigation of a sample of bingo operations.

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In a review of theoretical explanations of gambling behavior Kim King (1985) suggests an extension of the functional approach which he labels an "Economic/Status" explanation. This explanation stresses the positive functions of gambling for society and the individual. According to the economic/status explanation, the positive functions of gambling (for the individual) include an innovative opportunity for economic enrichment, success, and status (King, 1985). We would like to suggest that such reasons explain why a number of legally suspect bingo operations have emerged in North Carolina. The same reasons appear to explain the use of various schemes by some bingo operators to cheat their patrons. In short, bingo profits appear to be the primary reason for the massive increase in the number of bingo operations. Other theoretical factors are suggested to account for the attraction of patrons to bingo games.

According to King (1985), the "functionalist" explanation of the recent popularity of bingo gambling is due to the tension-release afforded to players of bingo; bingo offers an exciting and innovative way to attain economic success. A concurrent Marxian explanation sees bingo gambling as an opiate of the oppressed, providing a false sense of control and success (King, 1985). Other theoretical factors suggested by King include the symbolic interactionist idea that gambling is a way to display one's self to others in order to gain character (Goffman, 1967) and the idea that gambling for some people is a means of conspicuous consumption (Veblen, 1899). These factors may account for the popularity of bingo operations, however the focus of this paper is not upon an explanation of why bingo has become so popular.

This paper will outline some of the legally suspect methods used by unscrupulous bingo game operators. The information for this report is based upon an undercover police investigation of illegal bingo activity in North Carolina. The investigation was to explore the nature of illegal bingo gambling within the state.

Bingo gambling has a unique history in North Carolina; its recent legal history will be discussed in this treatise as well as the various legitimate and illegitimate methods of bingo game operators, state law designed to regulate bingo gambling and measures taken by "professional" (versus "charitable') operators to protect their lucrative but legally suspect trade.

Background

Bingo! Bingo is a popular game of chance in which players attempt to produce a winning pattern of numbers on uniquely numbered game cards

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as a variety of alphanumeric symbols are selected before an audience in a seemingly random fashion. Although most people have played or are familiar with how the basic game of bingo is played, the game has evolved over time particularly since it became a legal form of gambling in North Carolina. There are a number of game variations and a distinctly unique vocabulary among professional bingo game operators and players. A glossary of terms is available from the authors for readers who are unfamiliar with the games run by professional operators.

In 1979, the state of North Carolina enacted a new law (North Carolina General Statute 14-292.1) which allowed nonprofit (tax exempt) organizations to award cash money as the prize in bingo games. The intent of the law was to allow charitable groups the opportunity to run cash bingo games as a method of gathering revenues desperately needed by many worthy organizations to survive and continue their community service projects. The 1979 law restricted game operators as specified below.

The nonprofit groups were allowed by law to award up to five hundred dollars cash on a single bingo game. The maximum amount of prizes in cash or merchandise to be awarded at any one session of the games was limited to $1,500.00 per session. The law specified a limit of two bingo sessions per week per nonprofit organization. Each bingo session could not exceed five hours. Two different exempt organizations coud run bingo games in the same building during a single week but the sessions were not allowed to run four consecutive nights of the week. Furthermore, the law provided that two distinct exempt organizations, using the same building during a single week, could not use the same bingo equipment or personnel. These provisions, as well as others, were designed to prevent misuse or over use of bingo as a method of revenue enhancement.

An "exempt organization" was defined as one that had been in continuous existence in a county for at least one year and exempt from taxation as defined by law under sections of the Internal Revenue Code or under similar provisions of the North Carolina General Statutes. Organizations operating cash bingo games were required to display within the bingo room a letter from the Internal Revenue Service, or North Carolina Department of Revenue, indicating their exempt status. Furthermore, the law required the exempt group to select a special committee to assume responsibility for the bingo operation and to register the game with the sheriff of their county. The committee was required to place the proceeds from bingo into a separate account to be audited annually by the committee; a copy of the audit had to be filed with the sheriff prior to September 15 of each year.

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Violation of the 1979 law as discussed above constituted a misdemeanor.

The number of cash bingo operations in North Carolina rose dramatically after the 1979 law went into effect. Many worthy charities were able to benefit from bingo proceeds. However, a number of bingo operations emerged which worked under the guise of an exempt status with the intention of making big profits for individual professional game operators instead of generating proceeds for charitable organizations. The tactics of the professional bingo operator are discussed in the following section.

Legitimate and Illegitimate Methods of Professional Bingo Operators

The motive of the professional bingo operator, as opposed to the motive of a legitimate charitable organization, is personal economic enrichment. A frequently used method of the professional is to contact a legitimate tax exempt organization and offer to conduct a bingo operation "on behalf" of the organization. He offers to supply all the necessary equipment, personnel, advertisement and effort required to run a game "properly'.

Professionals attempt to target groups with exempt status who appear to lack the resourc~ necessary to promote a popular game. Once a group is targeted, the professional operator arranges a meeting with the administrative leaders of the organization. He presents himself as a successful bingo operator and attempts to convince his audience that he has the expertise, equipment, manpower and other resources necessary to run a fun, clean game that will provide the much needed supplemental revenue desired by the organization. The professional may offer to the organization a fixed sum of money guaranteed to derive from the game each week. If the group leaders appear uncertain of his offer, he may tell them that he has a list of other nonprofit groups who want to get started with him, but he has put them off until he could attend the current meeting. He voices a belief in their cause and pressures the group to accept his offer.

Many professionally organized bingo games started in North Carolina during the years following passage of the 1979 law which legalized bingo gambling (1979-1983). The professional operator would give a weekly or monthly sum of money to the exempt organization in exchange for use of their tax exempt status necessary to operate the game. The predetermined minimal sums paid to the charities were normally a small percentage of total revenue generated by the games.

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The total revenue per bingo session can be quite difficult for anyone other than a game operator to track since each game is on a cash basis; the number of players fluctuates from game to game during the same session and the number of cards purchased per player per game changes, as well. The number of games offered per session may vary, too. The result is that the bingo operator is able to report as much or as little income as he desires. This tactic is called "skimming" and refers to the game operator's ability to pocket a discretionary portion (the majority, perhaps) of the proceeds and record only a fraction of the actual revenue generated per session.

A second way professional operators make money off the games is to rent a bingo location to the exempt organization. The rent money comes from the revenue reported by the game operator to the charity. Bingo income was required by the 1979 law to be reported and deposited into a separate account maintained by the charity. Disbursement from such accounts were limited in nature by the 1979 law. Rent money was a legal dispersement. The intention of the law, as it related to such dispersement, was to make sure the money derived from bingo could be used to meet the costs associated with operating the games and to confine the use of profits to meeting the service mission of the organization. Profits, for example, could not be used to fund parties for organization members. However, the law provided that proceeds could be dispersed for certain costs of operating the games such as rent of the building, utilities and the prizes awarded. Consequently, professional bingo operators would rent a building then sublease it, at an exorbitant rate, to the exempt organization. Since the rent money was generated by the bingo sessions and not an actual cost to the organization, the high rent was of no concern to the organization. The bingo operator usually rationalized his inflated rent to the organization on the basis of his personal need to earn a livelihood. Cases were found in which professional operators charged rent in excess of two thousand dollars ver nieht. This gives one an idea of how lucrative bingo operations can become.

A third method of making money off the games is from the sale of concessions. Drinks and snack food represent another source of profit to the operator. These profits were unregulated by the 1979 law. The law did forbid, however, the sale or consumption of alcoholic beverages during bingo sessions.

Another strategy taken by many professional operators was to start their own nonprofit organization as a guise for their bingo operations. This way, the professional operator would not have to depend on soliciting other

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exempt organizations and he would not have to split any of the profits. He could skim an even greater share of the total revenue using this method. Furthermore, if he created his own corporation separate from his own exempt organization, he could pay dispersement from the bingo account to himself by having his exempt organizations and he would not have to split any of the profits. He could skim an even greater share of the total revenue using this method. Furthermore, if he created his own corporation separate from his own exempt organization, he could pay dispersement from the bingo account to himself by having his exempt group sublease the bingo building from his corporation. An inflated level of rent could be paid by his "charity" to his corporation. In addition, merchandise to be awarded as bingo prizes could be purchased, at an inflated level, from the corporation.

An additional method of enhancing the revenue of bingo operations is to cheat the bingo patrons. There are a number of ways to accomplish this, however, this paper will highlight only those techniques which are used to lower the odds of winning through manipulation of game cards and bingo balls. Investigation uncovered the following forms of cheating.

"Leading': Bingo (ping pong) balls are often painted. Specific balls are painted with a thicker, heavier paint so these weighted balls stay at the bottom of the chamber. Lighter balls circulate closer to the top of the chamber and are the ones removed by the game caller.

"Palming': This is a sleight-of-hand movement used by the caller to replace a ball selected from the chamber with one hidden up his sleeve or on another part of his person.

"Soaking': This refers to soaking the balls in a liquid substance until the balls absorb enough moisture to weight them down and lessen their chances of being drawn from the chamber.

"Injecting': Balls are injected with various substances, by a hypodermic syringe to weigh them down.

"Mis-slotting: Many houses use flash boards to display the number of a ball drawn by a caller. The Flash boards are wired so any ball of any number can cause one specific number to appear on the flash board. The caller can avoid calling any other specific number with this type of flash board, yet give an audience the impression of an honest call.

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"High-Low Balls:

Bingo balls are manufactured and sold in sets; each set contains seventy-five balls. There is one ball for every possible alphanumeric combination in the game. It is possible to lower the number of game winners by mixing sets of balls; by using a mixed set of balls with high numbers over-represented, for example, the probability of a win by patrons with certain cards can be drastically reduced.

"High-Low Cards':

This tactic is much like the one discussed above. Bingo cards are manufactured in sets. An unethical game operator can create a mixed set of cards over represented with high numbers, for example. Furthermore, if the operator mixes sets of balls to create a set over represented with low numbers, he can greatly reduce the opportunity for winning among his patrons.

Protective Measures Taken by Professional Bingo Operators

The major protective measure taken by professional game operators in North Carolina was the creation and development of the North Carolina Bingo Association. The purpose of this organization is to combine the economic and political resources of individual game operators across the state in order to protect their type of industry from unwanted interference with their trade. This organization enlisted the services of attorneys whose tasks included the preparation of materials full of advice for members concerning, for example: acutal steps members should take in the event of their arrest for violation of the "bingo statute', operation of bingo games, examples of case law concerning the operation of bingo games, examples of successful lease agreements, sample letters to county officials designed to successfully present their own legally required audit, notes concerning the requirements of such audits, information concerning arrangements for taxes, insurance and utilities, a checklist of suggestions to professional operators designed to facilitate their ability to run an operation free of legal liability and a list of game rules that operators can follow in order to minimize potential problems with law enforcement.

Legislation Designed to Curb Abuse

Effective October 1, 1983, the North Carolina Legislature enacted Part 2 Article 37 of Chapter 14 of the General Statutes of North Carolina. This statute was enacted to address a great number of the issues and problems

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that arose concerning the game of bingo in North Carolina. It should be noted that provisions were made, making it a Class H felony for any person to (1) operate a raffle or bingo game without a license, (2) to operate a raffle or bingo game while license is revoked or suspended, (3) to willfully misuse or misapply any monies received in connection with any bingo game or raffle, and (4) to contract with or provide consulting services to any licensee. For the first time, in addressing the issue of bingo, North Carolina had a law which made provisions for felony indictments associated with violation of the regulations mentioned above.

The 1983 bingo law imposed a number of other restrictions on game operators. First, the law required any exempt organization desiring to operate cash bingo games (with prizes of more than ten dollars per game) to go through a bingo licensine orocedure: the procedure to be handled by the Department of Revenue. Secondly, the exempt organization was allowed to pay one member to conduct a bingo session but he or she was required to be a member of good standin2 within the organization for at least one year prior to hiring. His or her waees were limited to one and one-half times the existing minimum wage. Third, and most important, an exempt organization was not allowed to contract with any person to operate bingo sessions. Lastly, no subleasing of a bingo location was allowed. Violation of these provisions were defined as misdemeanors.

It was not long after the new law went into effect that professional bingo operators came up with a new tactic to circumvent the change in legislation. Professional bingo operators began to forfeit their old licenses and open what the" law refers to as "beach bingo" which was expressly excluded from regulation under the 1983 statute which was designed to crack down on the "big money" games offered by professional operators. Beach bingo, by definition, is described as bingo games which offer cash prizes of $10.00 or less or merchandise that is not redeemable for more than $I0.00.

The professional bingo operators now working under the auspices of "beach bingo" open their doors to the general public and proceed to hold games and offer cash prizes. Observation of many such establishments revealed that cash prizes often exceeding $5,000.00 were being awarded at many locations. This sort of figure hints at how lucrative these operations can become. One tactic used by many professional operators to make such awards "legal" is to hold "drawings', for game players only, during or at the end of each bingo game. The money is not linked to winning the bingo game but nonetheless motivates people to play. Game winners receive no more than a $10.00 cash prize but winners of drawings receive considerably

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more money. During confrontations between law enforcement and professional game operators, over this point of technicality, the operators maintained they were administering the drawings as "cash giveaways" which served as a promotional and advertising technique fully legal and within their rights to offer as "free enterprise businesses'.

Law enforcement members of the task force sought help from the Attorney General's Office in fighting the ability of bingo operators to offer big money prizes. As a result of the outcry for assistance, the Attorney General's Office went into the 1987 legislative session, addressing the issue of beach bingo and asking that provisions be made to the existing statute to incorporate beach bingo into said statute. During the 1987 legislative session, House Bill 1004 asked for revisions in General Statute 14-309.5 as it related to bingo and under Section 14-309.14; an amendment was added stating, "No beach bingo game may be held in conjunction with any other lawful bingo game, or 'promotional bingo game', or any offering of any opportunity of obtaining anything of value by chance, whether for valuable consideration or not'. An interesting side note to this legislation is the fact that rather than becoming effective on October 1, 1987, the legislation was not scheduled to become effective until January 1, 1988. This rather late effective date gave professional operators time to plan and apply for operation of beach bingo. It also allowed the professional bingo operators enough time to secure legal counsel to try to obtain a restraining order as to this portion of the new legislation.

In conclusion, it appears that a legal change originally intended to allow charitable organizations revenue enhancement by offering cash bingo games and prizes has created opportunities for professional game operators whose major motive is personal enrichment through a form of legalized gambling. It appears that law enforcement will be able to prosecute bingo operators who give away any type of individual cash award which exceeds ten dollars in value, (effective January 1, 1988). It appears, also, that professional operators remain motivated to come up with techniques which allow them to offer "big money" prizes to motivate patrons to seek out their games and pay to play. Such motivation, if allowed, may create competition for patrons between organizations operated by bingo professionals versus those genuine civic organizations who choose to offer the "more legitimate" but less lucrative $10.00 games. The civic organizations may lose much potential bingo revenue to professional game operators. The future will reveal the response of professional operators to current legislation designed to crack down on this form of legalized gambling in North Carolina. ~

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References

Dixie, Rachael. (1987). It's a great feeling when you win: women a n d bingo. Leisure Studies, 6 (2), pp. 199-214.

Goffman, Ervin, (1967). Interaction Ritual. Garden City: Pantheon.

King, Kim. (1985). Gambling: Three forms and three explanations. Sociological Focus, 18 (3), pp. 235-248.

Veblen, Thorstein. (1899). The theory of the leisure class. New Yak: Mentor.

Note: An Appendix of Bingo Vocabulary is Available From the Authors, Upon Request.

One of the authors had the recent opportunity to make the first felony indictments in North Carolina under new provisions of bingo law (G.S. 14-309). Since this initial case, several other cases have been undertaken by other jurisdictions and are in varying stages of the judicial process.

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