Two Juneau-based gaming cooperatives have shorted the charities they work for by nearly $600,000 since 1995, leading the state to withhold their permits and audit the cooperatives for financial and regulatory problems.
George Wright, who manages both cooperatives plus a third for 18 member nonprofit groups, says the state is just uncomfortable with how large and successful his pull tab and bingo operations are.
``We haven't done anything wrong except grow,'' Wright said. ``When you're the largest, you get all the attention.''
Pull tabs are cards usually sold for a dollar or less that are torn open, sometimes revealing cash prizes. Profits are supposed to fund nonprofit groups.
Bingo games and pull-tab shops run by the Multiple Charities Cooperative and Last Chance Cooperative brought in $3 million last year. But according to state documents the cooperatives haven't been paying enough to the charities they were set up to fund. Nor have they been paying city sales tax. Instead, the money is spent on expenses many times higher than state gambling law allows.
The state is also concerned Wright may be wielding too much power in the cooperatives, which are supposed to be run by their nonprofit members.
``That's a question we have,'' said state Gaming Unit Manager Jeff Prather.
But the nonprofit groups funded through Multiple Charities and Last Chance rave about Wright and the work he has done to bring money to their programs.
``I have nothing but positive things to say about the organization,'' said Tim Adair, assistant coach for Midnight Suns Softball. ``George Wright does everything he can to make sure every penny gets used by the organizations.''
Last year that was $74,600 per charity, more than half the budget for many of the dozen nonprofits.
That's not enough, according to the state, which says the cooperatives owe member charities a total of almost $590,000.
Watching the game
State files on Multiple Charity and Last Chance cooperatives are thick with letters threatening permit revocations and demanding documents to substantiate where money has gone.
The threats were made good in January, when the Gaming Division refused to renew year 2000 permits needed to run both cooperatives. Wright has appealed, and continues to operate during the appeal process, which is expected to end this month.
``We have problems with that operation and it's confidential until it's resolved,'' said Prather. ``The financial statements or the reports they submitted to us showed they were not meeting the expense limitations.''
There's nothing new in that. Since 1995 Multiple Charities and Last Chance have repeatedly spent too much and given the charities too little, according to the state documents. Also of concern to the state is a reversal to the pattern in 1999, when the cooperatives appear to have given more money than they had available to the charities.
Bingo, pull tabs and raffles are allowed in Alaska only to raise money for charities, and are regulated by the state Department of Revenue. To ensure they benefit the charities, gaming cooperatives are required to give at least 30 percent of their income, after subtracting the cost of prizes, to their nonprofit members. The flip side is the gaming cooperatives aren't allowed to spend more than 70 percent of the same income on expenses, such as rent and wages.
Multiple Charities and Last Chance run two bingo halls and 16 pull-tab shops. Their profits and expenses are evenly split by 12 member charities, which are happy with the checks they receive several times a year.
Those checks have rarely added up to the required 30 percent. From 1995 to 1998, Multiple Charities shorted its nonprofit members more than half a million dollars, according to its financial records.
Though its pull-tab shops have been profitable, Multiple Charities bingo expenses have been as high as 256 percent of its income. Since 1995 Multiple Charities reported spending $890,000 more for bingo games than it earned.
The bingo losses were in Kenai, where Multiple Charities opened a new bingo parlor competing with already established bingo nights put on by other charities, Wright said.
``It's doing very well now, black ink, lots of it,'' Wright said.
Another oddity occurred in 1999 when the charity payments by both cooperatives exceeded the amount they had available after paying expenses,. Multiple Charities paid $447,000 to charities when it had only $261,000 in net proceeds, while Last Chance paid $432,000 when it had just $257,000 in proceeds.
``The question is, if you made $261,000, where did the money come from to pay $447,000?'' Prather said.
Wright said extra money was available because payments by the cooperatives were based on gaming revenues through January of this year, whereas the state is basing their assumptions on what was collected through December of 1999.
``We had other revenue that belonged to them from gaming,'' he said.
For 1995 to 1998 Last Chance owes its charities a total of $41,070. All five years Last Chance went over the allowed expenses, last year by $172,848 or 12 percent.
That's not much, considering the size of the operation, Wright said. Multiple Charities spent just 1 percent more than allowed on administration, ``which is nothing,'' Wright said, ``Pretty nitpicking.''
Wright said the higher-than-allowed expenses reflect the cost of expansion and of complying with city sales tax. He's disputing the sales tax, which his cooperatives stopped paying in 1997. The city is suing both cooperatives to collect more than $355,000 in sales taxes they owe.
The state regulators don't care about sales tax.
``We are auditors and investigators,'' said Prather, state gaming manager. ``All we are concerned about is whether George is in compliance with the statutes and regulations. If he's not, we've told all these (cooperatives) in the state that they either get into compliance or they're not going to be allowed to continue.''
The charities have no interest in questioning their gift horse.
``We were getting quite a bit of money so the assumption was it was the full amount,'' said Gordon Kostenko, a member of the Juneau Baseball Softball Association. ``If they're shorting us it's a very small amount, or they're operating in such a way that they're able to contribute quite a large sum.''
The charities' main complaint is with the state regulators who are supposed to be protecting them.
Hurting the victims
Last year Multiple Charities and Last Chance put $911,000 into Juneau charities - more money than anybody else, Wright brags.
Money from the pull-tab cooperatives pays for sports equipment, team travel and scholarships. It funds the breakfast program at Glacier Valley School, rents band instruments for middle school students and started the Native arts and crafts classes at Gastineau Human Services' halfway house.
``Strip it all away, can everybody, and the only ones you hurt are kids,'' Wright said.
So far, complying with the investigation has cost the cooperatives more than $100,000, said Dave Massey, of the Midnight Suns Softball team and Juneau Baseball Softball Association. They've provided the state with 8,300 pages of financial records and documents. Massey expects that bill will throw the cooperatives out of compliance again.
``They've created this enormous amount of work and expense for the co-ops and I guarantee we're not going to be able to put as much money into the co-ops this year,'' Massey said.
If Multiple Charities and Last Chance were to actually lose their permits, and be shut down, the charities would suddenly have to come up with thousands of dollars on their own, or curtail their activities. Student athletes would be spending half their time raising money instead of practicing, Massey said.
``If it wasn't for gaming these kids would be out in the street selling light bulbs and candy,'' said Massey.
The Juneau Little League lost its pull-tab permit a year and a half ago because it also wasn't meeting the minimum 30 percent. With the permit went more than $40,000 a year in easy money.
``It brutalized us,'' said Little League President Jim O'Donnell. ``We're real short on things like bats. We've scaled down on the quality of baseballs and stuff we used. We've basically had to tighten our belts.''
Parent volunteers have also had to spend hundreds of hours raising money to send the successful Little League teams to tournaments. About two months ago the Little League was reissued a pull-tab permit, and now O'Donnell is trying to get into one of the cooperatives Wright manages.
``That takes a lot of pressure off parents and kids. You can put your kids on that one fund-raiser a year and you can use your parents for instruction and coaching and picnics instead of always going out and looking for money.''
Deputy Commissioner of Revenue Neil Slotnick admits it is difficult to enforce the law without hurting the groups the state is supposed to help. If the gaming division shuts down a cooperative, all the nonprofit groups funded by it suffer.
``It became difficult for us to go after the permits when they were actually the victim rather than the cause of the problem,'' Slotnick said.
``On the other hand, if a (cooperative) is out there and it's not returning the right amount of money to its charities, then we probably should take some sort of action, because the whole idea of the (cooperative) is the charities are supposed to have some kind of control.''
The state investigator is trying to determine whether Wright is actually acting more as an operator, who profits from running pull tab and bingo enterprises for nonprofit groups.
``That's what they're trying to tell me, is I'm an operator,'' said Wright, who denies the charge. He said the only money he draws from the game is a $52,000 annual salary. ``There's no self-gain in George's game.''
Board members of the cooperatives agree.
``George is doing our bidding. He's the rudder, but he's not the director,'' said Massey of Midnight Suns Softball. ``He doesn't stand up in meetings and tell us what's happening.''
While operators must be licensed and post bonds the state can then garnish, the managers of gaming cooperatives don't, said Prather, state gaming manager. That leaves the department little recourse.
``We can't do anything to George, if George is not operating an operation that is in compliance with the law, other than revoke the permit,'' Prather said.
Or sue, which is what the state did with a similar case two years ago. According to allegations in files in the case, which is still before the state Superior Court, an Anchorage couple was managing several gaming cooperatives to profit themselves. The couple charged exorbitant rents and fees, and set up a charity of their own, the Alaska Charitable Gaming Association.
The Charitable Gaming Association is now one of the nonprofits Wright serves, though he claims it has changed and now funds youth activities and scholarships.
``If the charities are getting their share and nobody's profiting off the expenses, what's the big deal?'' Wright said.