Although Allied Veterans is registered as a charitable organization for tax purposes, Bailey said that investigators found that from January 2008 to January 2012 only $5.8 million went to any charitable groups, including those serving veterans.
By contrast, he said, “large sums of money have been spent by Allied Veterans of the World on lobbying efforts and donations to political campaigns.” Law-enforcement officials are in the process of seizing 292 bank accounts containing $64.7 million, 170 properties and 80 cars and boats, including Maseratis and Ferraris, they said.
“Using the word ‘charity’ to cover a scheme is not only wrong but it is callous and it is despicable,” said Florida Attorney General Pam Bondi, who has assigned her top prosecutors to the case. “Claiming to be an organization designed to help veterans in order to run an illegal scheme insults every American who ever wore a military uniform.”
Allied funneled the gambling proceeds through for-profit corporations that paid about $90 million to Allied Veterans’ management, its software provider and attorney. More than 100 for-profit corporations, shell companies and Internet cafes were used to hide the money produced by the gambling centers, police said.
At the center of the enterprise was Kelly Mathis, 49, a lawyer with the Jacksonville law firm of Mathis & Murphy, who serves as the registered agent for 112 of the affiliated companies in the chain. Using software technology run by an Oklahoma company, International Internet Technologies, Allied illegally operated slot machines under the guise of selling time on the Internet, Bailey said. Mathis’ law firm refused to comment Wednesday.
Investigators say Mathis reaped at least $6 million in illegal profits from the enterprise while the owner of the software provider, International Internet Technologies, Chase Burns, 37, collected $63 million from 2008 to 2012 for his Florida operations alone.
The two “national commanders” of Allied Veterans, Jerry Bass, 62, of Jacksonville, and John Duncan, 65, of Boiling Springs, S.C., profited $30 million, Bailey said, and the owners of the Internet cafes reaped $194 million in hidden gambling profits.
The owners of the gambling centers included Nelson Cuba, 48, president of the Fraternal Order of Police’s Jacksonville Lodge, and Robert Freitas, 47, the lodge’s vice president. The pair did not own or operate the gambling operations, but investigators say they received weekly payouts totaling more than $500,000 over 18 months from a shell corporation associated with Allied Veterans.
Both face the additional charge of money-laundering by structuring transactions to evade reporting or registration requirements. They were booked into the John E. Polk Correctional Facility in Seminole County.
Law-enforcement agents in Oklahoma conducted the first arrests on Monday, when they searched the offices of Burns and his wife, Kristen Burns in Fort Cobb, Okla. At least 500 IRS and Secret Service agents and local and state law-enforcement officials then executed 57 arrest warrants and 53 search warrants across Florida on Tuesday and Wednesday, Bailey said.
Police in Oklahoma have seized the computers from Burns’ office, essentially rendering all 49 Internet cafes in Florida inoperable, said FDLE spokeswoman Susie Murphy.
For years, law enforcement officials, led by Eslinger, have warned legislators about loopholes in state sweepstakes gaming law that allowed Internet cafes to illegally operate slot machines.
During that time, Allied Veterans contributed an estimated $2 million to state and local political campaigns, investigators said. According to a preliminary analysis, Allied Veterans groups and International Internet Technologies spent $340,000 in campaign contributions in the last election cycle and $195,000 in the 2010 cycle. State lobbying compensation reports show that the organization spent $740,000 on lobbying the Legislature.
Eslinger said that those arrested are being held without bond and face, in total, charges of 57 counts of Racketeering Influence Corrupt Organization, or RICO, 57 counts of RICO conspiracy, 614 counts of illegal possession of slot machines, 614 counts of gaming violations, 614 counts of keeping a gambling house and 1,265 counts of money-laundering.
Police seized computers, cash, computer servers, records and some slot machines from 40 gaming centers and a warehouse, Eslinger said.
He said the name Operation Reveal the Deal was chosen because police say a player can’t distinguish between Vegas-style slot machines, in which you hit play, and the Internet cafe machines, in which you press the “reveal” button.