Hillsborough County commissioners were wary of Allied Veterans of the World & Affiliates long before its owners were arrested Wednesday on charges of racketeering and money laundering.
The owners spoke to the commission in 2011 about how proceeds from the four Internet sweepstakes cafes they operated in Hillsborough and the 36 others across the state helped veterans.
The organization’s directors mentioned how they donated about $6 million to charities during four years, including $100,000 to the Bay Pines VA Healthcare System in Pinellas County that helped refurbish a pier.
“They got up in front of us and basically, I think, lied to us about what they did,” Commissioner Sandy Murman said. “What they were interested in was profits. All they were doing was preying on veterans.”
On Wednesday, federal and state law enforcement officers shut down the purported veterans’ charity, accusing its owners of keeping for themselves nearly all of the millions of dollars its cafes raked in since 2008.
Investigators said Allied Veterans, which was registered as a tax-exempt group, donated 2 percent of the $300 million it generated from its 40 cafes to charities or veterans groups.
The cafes were a front for illegal gambling, investigators said.
Four lead co-conspirators, including Allied Veterans commander Jerry Bass, 62, and the organization’s attorney, Kelly Mathis, 49, both of Jacksonville, have been arrested and charged with conspiracy, mail fraud, wire fraud, operating an illegal gambling business and money laundering.
Forty-nine people in five other states also have been arrested. Authorities seized computers, slot machines, 170 properties and 80 vehicles and vessels, the Florida Department of Law Enforcement said.
The fallout from Allied Veterans’ collapse went as high as the governor’s office in Tallahassee.
Lt. Gov. Jennifer Carroll resigned Wednesday because she worried her previous ties to the St. Augustine-based organization would distract from Gov. Rick Scott’s administration, said Adam Hollingsworth, the governor’s chief of staff.
Carroll once did public relations for Allied Veterans; she was questioned in the investigation but has not been charged with wrongdoing.
Murman said the company used lobbyists to challenge Florida’s gambling laws, which were vague in describing what constitutes a slot machine.
“It was pervasive how they tried to buy influence to stay open in our county and our state,” Murman said.
But Hillsborough commissioners saw the group was “trying to exploit what they thought were loopholes” in the law to keep their cafes open in Hillsborough, Murman said.
At a December 2011 meeting, the commission voted to ban Internet sweepstakes cafes, which effectively booted Allied Veterans out of Hillsborough.
“They belonged in no place in our county,” said Commissioner Kevin Beckner.
From 2010 to 2011, Allied Veterans had overseen four cafes, which it called “affiliates,” and 40 employees in Tampa. At the time, sweepstakes cafes were popular and dozens owned by others opened — seemingly overnight — across the region.
Cafe owners said they were offering a chance at cash prizes to customers who buy Internet time. Players see a slot machine on a computer screen, but operators say the winning numbers are predetermined, much like scratch-off tickets used as a promotion in fast-food restaurants and stores.
“It’s a pathetic front for them to use ‘veterans’ in their name,” he said. “We were uncovering all these shell companies across the state. When you have that type of business, it’s just rife with fraud and organized crime.”
Although Allied Veterans said it helped retired military personnel with clothing, food and finances, local veterans’ groups said they never saw a dime.
“I don’t know a darn thing about this group,” said Gene Jones, president of the Florida Chapter of the Veterans for Common Sense. “I have not had any contact with them as far as I know.”
Local veterans who work with legitimate fundraising organizations say scandals harm their ability to raise money and gain public trust.
“When you have something publicized like these guys, it besmirches every veteran organization,” said Dave Braun, who serves on veterans’ boards and organizations. “It raises doubt on veterans’ charities.”
Murman said it’s true a number of charities did receive donations from Allied Veterans — but those gifts came at a cost.
“The veterans’ organizations were being used like a token in a game,” Murman said. “I’m glad for the organizations that did get money from them, but it wasn’t clean money.”