Internet Sweepstakes Parlors in Limbo
Lawmakers Look to Ban Them
After Aberdeen police seized his computers and put him out of business, Darrell Phillips moved his Internet Café to Olmsted Village in Taylortown.
“I met with the chief of police and checked with the Town Hall,” Phillips said. “They had no problem with it.”
But opponents say places like his are thinly disguised online casinos, slipping through a loophole in state laws that were intended to ban slot machines. A couple of rulings by Guilford County Superior Court Judge John O. Craig III (currently the sitting judge in Moore County) in 2008 protect most such businesses unless the state law changes.
That very likely could happen. The state Senate last week overwhelmingly approved legislation to ban such operations. It is now under consideration in the House.
If it passes into law, Phillips will be out of business again.
For now, he said his place is doing well — as are others here and around the state. Phillips said people have the wrong impression if they think he’s running a bunch of high-tech one-armed bandits like the old time slot machines.
“It is really just a sweepstakes,” he said Wednesday morning, sitting by one of the flat-screen monitors in the back room of his D&J Internet. “You don’t even have to go to a keyboard or log on. As soon as you make your deposit, the outcome is predetermined.”
His customers pay a quarter a minute to use any of the computer systems. They make a deposit, get a user identification and password, and are free to play any of the games or just surf the Web. What they win has already been determined, according to Phillips.
“It’s just like a scratch-off,” he said. “That’s what people don’t understand.”
Those who don’t understand might include a good many of his customers. Out front, one regular was happily clicking the “spinning wheels” on her monitor as if betting from the balance credited to her account at the time she deposited her cash.
From time to time, she appeared to win, with icons in a “win pattern” blinking rapidly and numbers piling up beside a dollar sign. The screen looked much like those on casino floor slot machines at the MGM Grand in Las Vegas — only no bells or coin-clanks.
She’d turned the sound off, preferring to game away in silence.
“Our customers basically are people who just need something to do,” said Vanessa Sloan, who manages the café for Phillips. “Of course, everybody hopes to win; but if they don’t win, they just enjoy it.”
She sees the café as providing a real service, especially to two groups of locals.
“Older people have nothing to do,” she said. “They like to come. It’s a blessing for young people, too.”
She hastily added that one must be at least 18 to be allowed to play. There is a four-minute minimum, so Phillips’ online scratch-off chance costs the same as lottery tickets peddled by the state of North Carolina.
The Olmsted Village café is decorated with Vegas images: photos of Sinatra’s famous Rat Pack and still shots from “Ocean’s 11” and “The Godfather” are framed on the walls. The business sells boots, provides a TV lounge area, makes copies and offers FAX services.
Sloan has seen a few winners in the $700 range, but there is a practical rule that keeps any winners daily take-home under $600.
“The most we pay out on any day is $599 a person,” Sloan said. “They can come back the next day for the rest if they win more.”
The reason is taxes. The company would have to fill out and file IRS 1099 forms for any payment over that amount, according to Sloan. They would be willing to do it, but most winners prefer to collect any win is lower increments and take the tax filing responsibility on themselves, she said.
“They give you all your money,” she said. “But it is only $599 per day.”
As far as she is concerned, the so-called “Education Lottery” run by the state doesn’t seem to be helping schools very much.
“They have the same problems they had before the lottery,” Sloan said. “They always say they need more money. School fees are too big. I have kids at Pinecrest, and they have so many fees. How has the lottery helped that?”
Games Just Part of It
While Phillips’ café system operates like a pure sweepstakes, other Internet gaming parlors use different systems, according to Sloan. Some, she said, run just like the old poker machines that used to line gas station walls before the ban.
“Up the street, there’s a place with Pot-o’-Gold machines,” she said. “I think you pay per play on those, not like here where you pay per minute.”
At $15 an hour for high-speed Internet access, places such as the Olmsted Village café fill a need for people who want to do anything online from e-mail to eBay but don’t have their own computer and Internet access.
Here, they can stop in to log on and check mail, sent a note, view the latest hit on YouTube.
“Our systems have applications for whatever they need,” Phillips said. “Each one has a word processor, a Web browser.”
The gaming software installed has a local connection as well. It comes from a company operated by Rick Upchurch. Both Phillips and Upchurch are from High Falls. Computers used at Internet cafés are called “player terminals” by companies like Upchurch’s VS2 Marketing Group.
The main objective of each terminal, the company says, is to provide customers with “access to Internet, ability to work with documents, play fun games and validate sweepstakes entries.”
Visitors to a café can “play popular fun video games” or access the Internet, work with office documents and spreadsheets, or use media programs like a movie or audio player or a picture viewer.
Each terminal continuously shows a visitor’s sweepstakes points, available time and winning points — which a player can convert to network time. Visitors can even send messages to and from the café administrator without leaving their system.
Upchurch got into this business after poker machines were banned. He had been in that business when he was trying to look after his mother, who had Alzheimer’s disease.
“I was broke,” Upchurch said in a Friday morning telephone conversation from his High Falls shop. “A friend and I bought a three poker machines and put them out.”
That led to a successful business working with Phil Cornic, of Farmingdale, N,J., as his partner. They did business for 20 years on the poker machines, and never met. Two years ago around Thanksgiving they finally got together.
“He is an honorable person, he’s honest,” Upchurch said. “He is an engineer by trade.”
Cornic is the technical partner. Upchurch is the first to say he’s not particularly computer savvy and just got into this line when poker went out.
“We tried to look at life after poker,” he said. “We went to one of these in Montgomery (Alabama) and it was popular.”
‘Just Like Scratch-Offs’
Now he says he’s facing another squeeze play from the General Assembly.
Upchurch said he hasn’t spoken with any state legislators personally. His industry has its own lobbyists in Raleigh. One thing Upchurch stresses is that Inter-net cafés are strictly kept on the up-and-up by federal law.
“It is just like if you bought a box of scratch-offs,” he said. “You take in so much money. When you sell them, you pay out so much.”
That is the same way the poker games, for example, work on the player terminals in his café operations. There are no actual cards. All that is an illusion. The “hands” that appear to be dealt are already determined on a yearly basis.
“We run the sweepstakes over a year at a time,” Upchurch said. “The poker on there: say you had two pair, you are guaranteed whatever that gives you. You cannot fool with anything. It is predetermined. If you had a win there, you get the win.”
Players can cash out as soon as they pay in. Playing the game has no effect. Sloan said it’s just for the fun of playing. Visitors might just as well surf the web with their time.
Contact Joh Chappell by e-mail at firstname.lastname@example.org.
More like this story