Case 5:13-mj-00115-P AO 106 (Rev. 04110) AP/tication for a Search Warrant Document 1 Filed 03/11/13 Page 1 of 130 UNITED STATES DISTRICT COURT for the ffAR 11 2013 . ROBERTD O~N ii.S..DIST. cO/jrn~' NIS, CLERK c Sf.....,.. I ;&14" ~18t (JF ~ Western District of Oklahoma In the Matter of the Search of (Briefly describe the property to be searched or identify the person by name and address) International Internet Technologies, LLC located at 106 E. Kansas Avenue, Anadarko, OK 73005 ) ) ) ) ) ) __O!purv i Case No. M-13- 1/$ -P APPLICATION FOR A SEARCH WARRANT I, a federal law enforcement officer or an attorney for the government, request a search warrant and state under penalty of perjury that I have reason to believe that on the following person or property (identify the person or describe the prpP'erty tQ.be s~arched aflcU!iv~ its [pea/ion)' . internatiOnal Internet Tecnnologles, lLC located at 106 E. Kansas Avenue, Anadarko, OK 73005, more specifically described in Attachment A Western located in the --------------- District of person or describe the property to be seized): Oklahoma ----------------------- , there is now concealed (identify the See Attachment B The basis for the search under Fed. R. Crim. P. 41(c) is (check one or more): Ii evidence of a crime; Ii contraband, fruits of crime, or other items illegally possessed; ri property designed for use, intended for use, or used in committing a crime; LJ a person to be arrested or a person who is unlawfully restrained. The search is related to a violation of: Code Section 18 USC ?? 371, 1341, 1343, 1349, 1955, 1956, and 1957 Offense Description Conspiracy, mail fraud, wire fraud, operating an illegal gambling business, and money laundering f The application is based on these facts: See attached Master Affidavit flf Continued on the attached sheet. LJ -7'S~----- ) is requested Michael Favors, Special Age_n_t_ _ _ __ Printed t1q~e and title Sworn to before me and signed in my presence. Date: City and state: c:>K..LfV/~ C lrt; af:-. Gary M. Purcell, U.s-. Magistrate =--~~-~---- Printed nameund ti(/e Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 2 of 130 Attachment A Description of Premises 106 East Kansas Ave Anadarko, OK The building is stand alone building. The building is white brick with a red/orange front trim at the roof line. It has white paint on the windows they are encased with bars. There are no signs or writing on the building. Pictures Attached 106 East kansas Ave Anadarko, OK Case Document 1 Filed 03/11/13 Page 3 of 130 T56'East Kansas Ave Anadarko, OK Case Document 1 Filed 03/11/13 Page 4 of 130 TG6"East Kansas Ave Anadarko, OK Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 5 of 130 ATTACHMENT B ITEMS TO BE SEIZED a. For the period January 1, 2007 through the present, the following records and information that constitute evidence of the commission of, contraband, the fruits of crime, or instrumentalities of violations of Title 18, United States Code, Sections 371, 1341,1343,1349,1955,1956, and 1957: i. All bank records of the Owner identified in Attachment A, including account statements, cancelled checks, deposit slips, and retained copies of deposit items, records of wire transfers both into and out of the bank accounts, checkbooks, deposit receipts, records of cashier's checks or money orders purchased from funds, and log books of wire transfers. ii. Any documents or forms containing tax return information used or designed for use in filing any federal, state, or local income tax return (including Forms 1120, Form 990, and Form 990T) for the Owner identified in Attachment A. iii. All source documents or books of original entry to include books, records, receipts, notes, ledgers, journals, minute books, correspondence, and any other documents related to the preparation of any federal, state, or local income tax returns for the Owner identified in Attachment A. iv. All workpapers, schedules, summaries or other documents used or designed for use to prepare documents described in paragraph ii or iii above. v. Any letters, correspondence, notes, or evidence of communication regarding financial transactions involving the Owner identified in Attachment A, Johnny Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 6 of 130 Duncan, Jerry Bass, Chase Burns, Allied Veterans of the World, Inc. & Affiliates, Inc., Allied Veterans Management Group Inc., and/or Allied Veterans of the World Affiliates 31 through 85, including email correspondence. vi. Any corporate records for the Owner identified in Attachment A. vii. Any records containing the name, address, phone number, social security number, Employer Identification Number, or other information establishing the identity of persons who are Florida customers of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc.. viii. ix. Instrumentalities of the alleged crimes, including any computer or server. Any correspondence between and among Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, the Owner identified in Attachment A, any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc., and/or anyone on their behalf, including e-mails. x. Any records related to any training provided to any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc., including, but not limited to, any manual, any record of any communication with such a location, and/or any records regarding non-compliance with required procedures. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 7 of 130 xi. Any records related to a Florida customer account database for Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xii. Any records related to any sweepstakes, game, and/or simulation used by any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc., including, but not limited to, any records regarding amount paid for internet time, number of entries provided, number of entries played, and/or amount of winnings, xiii. Any records related to the purchase of internet time and/or the use of that internet time for any Florida customer of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xiv. Any records related to the Second Chance Drawing, including records regarding amount of winnings, frequency of the drawing, and/or any rules regarding the drawing, for any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 8 of 130 xv. Any software that is used, or has been used, by the Florida locations of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xvi. Any communications by wire between the Owner identified in Attachment A and any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xvii. Any contract or agreements between and among any of the following: the Owner identified in Attachment A, Johnny Duncan, Jerry Bass, Chase Burns, Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xviii. Any records related to the software license for Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc., including, but not limited to, any records related to the termination or modification of any such license. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 9 of 130 xix. Any records related to any training that is provided, or has been provided, to any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xx. Any records related to any finite cartridge used by a Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xxi. Any records related to a customer's odds of winning a prize at a Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xxii. Any records related to the liT Sweepstakes Promotion System used by any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. b. As used above, the terms records, documents, programs, applications or materials includes records, documents, programs, applications or materials created, modified or stored in any form. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 10 of 130 c. In order to search for data that is capable of being read or interpreted by a computer, law enforcement personnel will need to seize and search the following items, subject to the procedures set forth above: i. Any computer equipment and storage device capable of being used to commit, further or store evidence of the offense listed above; ii. Any computer equipment used to facilitate the transmission, creation, display, encoding or storage of data, including word processing equipment, modems, docking stations, monitors, printers, plotters, encryption devices, and optical scanners; iii. Any magnetic, electronic or optical storage device capable of storing data, such as floppy disks, hard disks, tapes, CDROMs, CD-R, CD-RWs, DVDs, optical disks, printer or memory buffers, smart cards, PC cards, memory calculators, electronic dialers, electronic notebooks, and personal digital assistants; iv. Any documentation, operating logs and reference manuals regarding the operation of the computer equipment, storage devices or software. v. Any applications, utility programs, compilers, interpreters, and other software used to facilitate direct or indirect communication with the computer hardware, storage devices or data to be searched; vi. Any physical keys, encryption devices, dongles and similar physical items that are necessary to gain access to the computer equipment, storage devices or data; and vii. Any passwords, password files, test keys, encryption codes or other information necessary to access the computer equipment, storage devices or data. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 11 of 130 d. With respect to any server that is seized and taken off-site, the server will be returned to the Owner identified in Attachment A within a reasonable period of time after a forensic copy of the server is made (for further forensic examination). Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 12 of 130 CASE NOS. I, Michael Favors, being duly sworn depose and state the following: 1. I am a Special Agent with Internal Revenue Service (IRS), Criminal Investigation, and have been so employed for the past twenty-five (25) years. During this time, I have been involved in numerous financial investigations concerning Title 26 income tax violations, Title 31 currency violations by individuals using various illegal schemes to conduct business, and Title 18 gambling and money laundering violations. These investigations involved working with agents of the IRS as well as other federal, state, and local agencies. In addition to my personal experience as a Special Agent, I have received specialized training in the area of currency laws during Continuing Professional Education courses conducted by the IRS. As a specialist in documentation, identification, and seizure of evidence of illegal income and currency violations, and in tracing of the conversion of such assets to other assets, I communicate with other Federal and State law enforcement personnel who specialize in this area. I also have experience in the debriefing of defendants, witnesses, informants, and other persons who have personal experience and knowledge in the amassing, spending, converting, transporting, and concealing illegally obtained currency. 2. This investigation is being conducted by the IRS and the United States Secret Service, with assistance from the Seminole County Sheriff's Office, Florida Department of Law Enforcement (FDLE), the Volusia County Sheriff's Office, and th~ Jacksonville Sheriff's Office (these state agencies are conducting an investigation that is expected to result in state charges being brought for gambling and other state law violations). This affidavit is based upon my personal knowledge, a review of evidence obtained 1 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 13 of 130 during the course of this investigation, and information obtained by me in my official capacity from other law enforcement officers and sources of information that have proven to be reliable during the course of the investigation. In particular, I am relying upon information provided to me by Special Agent Steven McCabe of the IRS in the Middle District of Florida. Special Agent McCabe has been a Special Agent with the IRS for seventeen (17) years, and he has participated in numerous money laundering investigations, embezzlement and fraud investigations, narcotics investigations, and complex tax investigations. Special Agent McCabe is the lead IRS case agent on this investigation, and Special Agent McCabe has advised me about the information that is included in this affidavit, as well as other information pertinent to the investigation and to the location to be searched in the Western District of Oklahoma. The investigation thus far has consisted of physical surveillance, interviews, record requests, undercover operations, public record checks, and analysis and examination of bank records and other documents. Because this affidavit is being submitted for the limited purpose of establishing probable cause to search the premises below, it does not include every fact that has been learned during this investigation. Overview of Investigation 3. The following is an overview of the investigation conducted to date: a. Allied Veterans of the World, Inc. & Affiliates (Allied Veterans) is a non-profit corporation organized under Section 501 (c)(19) of the Internal Revenue Code. Starting in 2007, "fundraising centers" began operating using the Allied Veterans name. Until April 2012, these "fundraising centers" were called "Affiliates" of Allied Veterans, and they claimed to be providing an "electronic sweepstakes" in connection 2 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 14 of 130 with the sale of internet time. In fact, the "fundraising centers" were nothing more than Internet Casinos that operated slot machines in violation of Florida's gambling laws. b. The Internet Casinos that used the Allied Veterans name were not the only ones that operated in Florida. Unlike some other Internet Casinos, however, Allied Veterans and others engaged in a conspiracy and scheme to defraud the public and governmental agencies into believing that the money spent, and lost, at the Internet Casinos that used the Allied Veterans name went to a charitable organization that was a member of the Veterans Administration. In support of those claims, Allied Veterans and others represented that Allied Veterans donated anywhere from 70% to all of the net proceeds or profits from its gambling operation. c. For the time period from 2007 to early 2012, investigators found evidence of over $6 million in what appear to be charitable donations by Allied Veterans. That amount, however, was only about 2% of the over $290 million in proceeds that were made from the gambling operations during that time period. Instead of going to charity as is represented, the vast majority of the revenue earned from the gambling operation went to for-profit companies and the individuals who operated Allied Veterans and its "Affiliates." To hide the true nature of it gambling operation from the public, Allied Veterans and others resorted to fraud and misrepresentations, which will be set forth in further detail in this affidavit. d. At various times, Allied Veterans has been presented with challenges to the legality of its operations. Allied Veterans now claims that it is no longer involved in the "electronic sweepstakes" business and that it "sold" its various Internet Casinos in April 2012. That is not true. With a few exceptions, the for-profit 3 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 15 of 130 companies that allegedly purchased the Internet Casinos are the same ones that were already operating them, and Allied Veterans continues to receive a portion of the gambling proceeds through Allied Veterans Management Group Inc. (which is a 100% subsidiary of Allied Veterans). Premises to Be Searched 4. I respectfully submit that there is probable cause to believe that a search of the premises listed below in paragraph 5 will lead to evidence of violations of federal law, including, but not limited to: Title 18, United States Code Sections 371,1341, 1343, 1349, 1955, 1956, and 1957. 5. The premises are located in the Middle District of Florida, Northern District of Florida, Southern District of Florida, and Western District of Oklahoma, as follows: Middle District of Florida 1. BREVARD COUNTY, ALLIED INTERNET CENTER (formerly known as AFFILIATE 41) located at 234 E. Merritt Island Causeway, Merritt Island, Florida 2. BREVARD COUNTY, THE REEF INTERNET CAFE (formerly known as AFFILIATE 50) located at 3128 W. New Haven Avenue, West Melbourne, Florida 3. BREVARD COUNTY, ALLIED INTERNET CENTER (formerly known as AFFILIATE 54) located at 401 Barton Blvd, Rockledge, Florida 4. BREVARD COUNTY, "rHE REEF INTERNET CAFE (formerly known as AFFILIATE 58) located at 6450 N. Wickham Road, Melbourne, Florida 5. BREVARD COUNTY, ALLIED INTERNET CENTER (formerly known as AFFILIATE 59) located at 3299 S. Babcock Street, Melbourne, Florida 6. BREVARD COUNTY, THE REEF INTERNET CAFE (formerly known as AFFILIATE 60) located at 1150 Malabar Road SE, Suite 101, Palm Bay, Florida 7. CLAY COUNTY, ELrrE INTERNET CENTER #71 (formerly known as AFFILIATE 71) located at 266 Blanding Blvd., Ste 1, Orange Park, Florida 4 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 16 of 130 8. COLUMBIA COUNTY, LAKE CITY INTERNET SERVICES (formerly known as AFFILIATE 56) located at 2218 W. Hwy 90, Suite 102, Lake City, Florida 9. DUVAL COUNTY, ELITE INTERNET CENTER #34 (formerly known as AFFILIATE 34) located at 5804 Normandy Blvd., Jacksonville, Florida 10. DUVAL COUNTY, ELITE #37 (formerly known as AFFILIATE 37) located at 2294 Mayport Road, Suite 10, Jacksonville, Florida 11. DUVAL COUNTY, ELITE #38 (formerly known as AFFILIATE 38) located at 1440 Dunn Avenue, Suite 5, Jacksonville, Florida 12. DUVAL COUNTY, HOTSPOT INTERNET CENTER #39 (formerly known as AFFILIATE 39) located at 5548 Norwood Avenue, Jacksonville, Florida 13. DUVAL COUNTY, HOTSPOT INTERNET CENTER #40 (formerly known as AFFILIATE 40) located at 969 University Blvd N., Jacksonville. Florida 14. DUVAL COUNTY, ELITE INTERNET CENTER #43 (formerly known as AFFILIATE 43) located at 4578 Blanding Blvd., Jacksonville, Florida 15. DUVAL COUNTY, ELITE INTERNET CENTER #44 (formerly known as AFFILIATE 44) located at 3814 University Blvd W., Jacksonville, Florida 16. DUVAL COUNTY, ELITE INTERNET CENTER #68 (formerly known as AFFILIATE 68) located at 9731 Beach Blvd., Jacksonville, Florida 17.FLAGER COUNTY, HEROS INTERNET CAFE (formerly known as AFFILIATE 61) located at 50 Plaza Drive, Suite 201, Palm Coast, Florida 18. HERNANDO COUNTY, GINLIN LLC 45 (formerly known as AFFILIATE 45) located at 2402 Commercial Way, Spring Hill, Florida 19.HERNANDO COUNTY, GINLIN LLC 52 (formerly known as AFFILIATE 52) located at 7269 Forest Oaks Blvd., Spring Hill, Florida 20. LAKE COUNTY, THE GRAND BUSINESS CENTER (formerly known as AFFILIATE 31) located at 1050 U.S. Highway 27, Suite 20. Clermont, Florida 21. LAKE COUNTY, ALLIED INTERNET CENTER (formerly known as AFFILIATE 51) located at 415 N. Grove Street, Eustis, Florida 22. MANATEE COUNTY, MEGJON LLC (formerly known as AFFILIATE 76) located at 5108 E. 15th Street. Bradenton, Florida 5 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 17 of 130 23. MARION COUNTY, ELITE INTERNET CENTER #57 (formerly known as AFFILIATE 57) located at 8602 SW Highway 200, Ocala, Florida 24. MARION COUNTY, ELITE INTERNET CENTER #63 (formerly known as AFFILIATE 63) located at 1033 NE 14th St., Ocala, Florida 25. MARION COUNTY, ALLIED INTERNET CENTER (formerly known as AFFILIATE 86) located at 17350 SE 109th Ter., #107, Summerfield, Florida 26. MARION COUNTY, ELITE INTERNET CENTER (formerly known as AFFILIATE 91) located at 2500 SE 58th Avenue, Ocala, Florida 27. NASSAU COUNTY, HOTSPOT INTERNET CENTER #46 A (formerly known as AFFILIATE 46) located at 463185 State Road 200, Yulee, Florida 28. PUTNAM COUNTY, ELITE INTERNET CENTER #81 (formerly known as AFFILIATE 81) located at 185 Carter Road, Palatka, Florida 29. SARASOTA COUNTY, JACS SWEEPS LLC 70 (formerly known as AFFILIATE 70) located at 501 N. Beneva Road #500, Sarasota, Florida 30. SEMINOLE COUNTY, ALLIED INTERNET CENTER (formerly known as AFFILIATE 67) located at 3030 E. State Road 436, Apopka, Florida 31.SEMINOLE COUNTY, ALLIED INTERNET CENTER (formerly known as AFFILIATE 74) located 944 State Road 436, Casselberry, Florida 32. ST. JOHNS COUNTY, ELITE INTERNET CENTER #55 (formerly known as AFFILIATE 55) located at 1092 S. Ponce De Leon Blvd., Suite G, St. Augustine, Florida 33. SUWANEE COUNTY, LIVE OAK INTERNET SERVICES (formerly known as AFFILIATE 42) located at 1525 Ohio Avenue N., Live Oak, Florida 34. VOLUSIA COUNTY, REOS (formerly known as AFFILIATE 32) located at 1585 N. Nova Road, Holly Hill, Florida 35. VOLUSIA COUNTY, ALLIED INTERNET CENTER (formerly known as AFFILIATE 33 and/or 78) located at 2411 Enterprise Road, Orange City, Florida 36. VOLUSIA COUNTY, THE COVE BUSINESS CENTER (formerly known as AFFILIATE 35) located at 3100 N. Woodland Avenue, Deland, Florida 6 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 18 of 130 37. VOLUSIA COUNTY, THE COVE BUSINESS CENTER (formerly known as AFFILIATE 36) located at 1348 W. International Speedway Blvd., Daytona Beach, Florida 38. VOLUSIA COUNTY, ALLIED INTERNET CENTER (formerly known as AFFILIATE 77) located at 4176 S. Atlantic Avenue, New Smyrna Beach, Florida 39. VOLUSIA COUNTY, BLUE WATERS TECHNOLOGIES LLC (also occupied by INTERNATIONAL INTERNET TECHNOLOGIES, LLC) warehouse and office located at 4470 Eastport Park Way, Port Orange, Florida 32127 Northern District of Florida 40.ALACHUA COUNTY, GAINESVILLE INTERNET SERVICES (formerly known as AFFILIATE 72) located at 4158 NW 13th Street, Gainesville, Florida 41. LEON COUNTY, BUSINESS CENTER UNLIMITED (formerly known as AFFILIATE 53) located at 7130 W. Tennessee Street, Tallahassee, Florida 42. LEON COUNTY, CAPITAL CITY INTERNET CENTER (formerly known as AFFILIATE 79) located at 3030 S. Monroe Street, Tallahassee, Florida Southern District of Florida 43. INDIAN RIVER COUNTY, THE WAVE BUSINESS CENTER (formerly known as AFFILIATE 65) located at 933 14TH Lane, Vero Beach, Florida 44. MONROE COUNTY, GULF INTERNET SERVICES (formerly known as AFFILIATE 85) located at 5800 Overseas Highway, Marathon, Florida Western District of Oklahoma 45. International Internet Technologies, LLC located at 106 E. Kansas Avenue, Anadarko, Oklahoma 73005 Additional Locations 46. COLLIER COUNTY, THE PALMS BUSINESS CENTER (formerly known as Affiliate 75) located at 8795 Tamiami Trail, Ste 207 and 208, Naples, Florida 47. NASSAU COUNTY, HOTSPOT INTERNET CENTER #46 B (formerly known as AFFILIATE 46) located at 463179 State Road 200, Yulee, Florida 48. MONROE COUNTY, GULF INTERNET SERVICES located at 92220 Overseas Highway, Tavernier, Florida 7 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 19 of 130 49. MONROE COUNTY, GULF INTERNET SERVICES located at 5450 MacDonald Ave, Stock Island, Key West, Florida 50. WAKULLA COUNTY, J&R BUSINESS CENTER located at 18 McCallister Road, Crawfordville, Florida 51.GADSDEN COUNTY, QUINCY BUSINESS CENTER located at 1970 Pat Thomas Parkway, Ste. 1954, Quincy, Florida 6. I seek a court order pursuant to Rule 41 (b) of the Federal Rules of Criminal Procedure, authorizing search of International Internet Technologies, LLC located at 106 E. Kansas Avenue, Anadarko, Oklahoma 73005, in the Western District of Oklahoma. For purposes of this affidavit, this location will be referred to herein as the "Target Location," which is more particularly described and identified in "Attachment An to the search warrant. The evidence sought to be seized from the Target Location consists of the items identified in "Attachment B" to the search warrant, all of which are fruits, instrumentalities and/or evidence of violations of the above noted federal statutes. Attachments A and B to the search warrant are incorporated by reference herein. Background on Allied Veterans and Allied Management 7. This investigation was initiated by the Seminole County Sheriffs Office due to complaints from the public about gambling at Internet Casinos in the Central Florida area. 8. Allied Veterans is a non-profit corporation organized under Section 501 (c)(19) of the Internal Revenue Code. Section 501(c)(19) provides for the exemption from federal income tax of a post or an organization of past or present members of the United States Armed Forces if: 8 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 20 of 130 a. b. At least 75% of its members are past or present members of the U.S. Armed Forces; c. Substantially all of its other members are individuals who are cadets or are spouses, widows, widowers, ancestors, or lineal; and d. 9. It is organized in the United States or any of its possessions; No part of net earnings of which inures to the benefit of any private shareholder or individual. Section 501 (c)(19) veterans' organizations have been permitted broad purposes by Congress to include one or more of the eight purposes below. It is not necessary that the purpose of an organization include all of the listed purposes, but an organization cannot have purposes of a substantial nature that are not listed. The exempt purposes include: a. Promoting social welfare of the community as described in Regs. 1.501 (c)4-1 (a)2; b. Assisting disabled and needy war veterans and members of the U.S. Armed Forces and their dependents, and the widows and orphans of deceased veterans; c. Providing entertainment, care. assistance to hospitalized veterans or member of the U.S. Armed Forces; d. Carrying on programs to perpetuate the memory of deceased veterans and members of the U.S. Armed Forces, or to comfort their survivor; e. Conducting programs for religious, charitable, scientific, literacy. or educational purposes (as set out in Internal Revenue Code (IRC) 170(c)(4)); f. Sponsoring or participating in activities of a patriotic nature; g. Providing insurance benefits for their members or dependents of their members, or both; or h. Providing social and recreational activities for their members. 9 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 21 of 130 10. The following activities are consistent with the requirements for exemption pursuant to Section 501(c)(19): a. b. Testifying before a governmental body with respect to such legislation; and c. 11. Reviewing proposed legislation that may affect veterans, at both the federal and state level; Informing members about the proposed legislation. Pursuant to Section 501(c)(19), the Internal Revenue Service will recognize a group of organizations as tax exempt if they are affiliated with a Central Organization. The Central Organization is the "head", or main organization. The Central Organization usually controls subordinate organizations called posts. In this investigation, Allied Veterans is the Central Organization, which means that Allied Veterans' governing instruments determine the membership requirements for each post (or what Allied Veterans used to refer to as its "Affiliates"). Because the "Affiliates" of Allied Veterans were under the control of Allied Veterans (the Central Organization), those "Affilates" would also have to, pursuant to IRC 501 (c)(19), abide by all the rules and requirements discussed in paragraph 9 above. 12. A tax exempt organization, including a Veteran's Organization, must file an IRS Form 990, Return of Organization Exempt from Income Tax (referred to herein as a "Form 990"), when annual gross receipts, whether related or unrelated, are more than $50,000. For purposes of determining whether a Form 990 must be filed, gross receipts are considered to be the total amounts the organization received from all sources during its annual accounting period, without subtracting any costs or expenses such as gaming prizes, payouts or other expenses. 10 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 22 of 130 13. A tax exempt organization, including a Veteran's Organization, must also file an IRS Form 990-T, Exempt Organization Business Income Tax Return (referred to herein as a "Form 990-T') when an exempt organization is liable for tax on unrelated business income. Unrelated business income is income from a trade or business regularly carried on, that is not substantially related to the purpose that is the basis of an organization's exemption. 14. According to the Form 990 filed for Allied Veterans for 2010, its mission or most significant activities are to "assist veterans with counseling, medical & sanitary needs, as well as food & shelter." The current officers and directors of Allied Veterans are Jerry Bass, John M. Hessong, Michael Davis, and William Forehand. Johnny Duncan is the past president and National Commander of Allied Veterans. 15. Allied Veterans Management Group Inc., (Allied Management) is a for- profit Florida corporation that was formed on March 2,2009. Allied Management's current officers are Johnny Duncan and Moses Ramos. Allied Management is 100% owned by Allied Veterans. Allied Management provides various management and administrative services to the Internet Casinos. Background on Internet Casinos 16. Allied Veterans was formed in 1979 as a non-profit corporation under the name of V.B.G. 451 st Post #1, Inc. From that time until 2006, Allied Veterans raised money for its charitable causes from bingo, car washes, and bake sales, among other things. In 1989, the name of the non-profit corporation was changed to Allied Veterans. 17. In February 2007, Allied Veterans submitted a Registration Application under the Solicitation of Contributions Act (Chapter 496 of the Florida Statutes) with the 11 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 23 of 130 Florida Department of Agriculture and Consumer Services (referred to herein as the "Agriculture Department"). The Application was signed by Duncan. In the Application, Allied Veterans stated that its purpose was "patriotic and charitable" and that its major program activities were to "provide financial support to veterans in need" and to "provide volunteers for veterans medical services." 18. In 2007, Internet Casinos, operating under the name of Allied Veterans, began to operate in Florida. Internet Casinos using the Allied Veterans name operated in various parts of Florida until approximately April 2012. Around that time, the names of most of the Internet Casinos were changed as part of an alleged "sale" of the Internet Casinos (which will be discussed later in this affidavit). Special Agent McCabe participated in an undercover inspection of one of the Internet Casinos located in Seminole County, Florida. I have been advised as to the results of the other undercover inspections that have been conducted by other agents and investigators at that Internet Casino and the other forty-three (43) Internet Casinos in Florida that used the Allied Veterans name. Undercover inspections of thirty-nine (39) of those locations were conducted between January 9,2012 and January 13, 2012 (investigators attempted to conduct other inspections during this time period of two other Internet Casinos in Hillsborough County, but those locations were closed). On January 20,2012, investigators conducted an undercover inspection of the Internet Casino located in Gainesville, Florida (Affiliate 72). On April 18, 2012, investigators conducted an undercover inspection of three Internet Casinos in Marion County, Florida (Affiliates 57, 86, and 91). On April 19, 2012, investigators conducted an undercover inspection of a location in Monroe County, Florida (Affiliate 85). After the Internet Casinos were 12 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 24 of 130 allegedly "sold" by Allied Veterans around April 2012, investigators conducted undercover operations of the Internet Casinos that are now operating under different names on August 20,2012 and August 30, 2012 (those are locations 1-44,47, and 50 in paragraph 5 above). Investigators also conducted undercover operations of another four (4) Internet Casinos on January 30,2013 and January 31,2013 (those are locations 46,48,49, and 51 in paragraph 5 above). With the exception of the Internet Casinos located in Seminole County, Florida, the Internet Casinos operate as follows: a. A customer enters the location and goes to the cashier counter. The employee asks the customer if the customer has ever been to the establishment before. If the customer says no, the employee asks for the customer's driver license and has the customer fill out an "Official Entry Form." The employee enters the customer's driver license information into a computer (master computer) located at the cashier's counter and creates a customer account. The customer completes the "Official Entry Form" in which the customer "agree[s]," among other things, that they are "purchasing prepaid internet time," that "there is no purchase necessary to enter the promotional sweepstakes," and that they are "not gambling." b. A customer pays and receives a card with a magnetic strip on it similar to a credit card (except for the two Seminole County locations). The card has the customer's information on it, including the number of entries that can be played. c. The customer then goes to a player station that consists of a computer monitor, computer tower and/or hard drive, mouse, and keyboard. The customer "swipes" the customer's card through a card reader that activates the computer and gives the customer access to the system. The computer has several 13 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 25 of 130 welcome screens and two (2) disclaimer screens that the customer must agree to before being allowed to continue. One disclaimer screen provides information about the "sweepstakes" rules, including eligibility, how to enter, winning entries, conditions, prizes, claiming prizes, and general rules. The other disclaimer screen states, "By clicking CONTINUE, you agree that no purchase is necessary to participate in the sweepstakes or to reveal sweepstakes entries using the sweepstakes readers." d. The computer monitor provides several screens that display a variety of game theme names and choices, such as Captain Cash, Lucky Shamrocks, Smokin 7's, and Money Bunny. The customer selects a game theme, and the game theme appears on the computer as a spinning wheel slot machine type game. e. The customer must then wagerlbet/reveal a quantity of sweepstakes entries (credits) (Letter G) for each iteration of game play that is determined by the "Level" of play selected (Letter F). The amount of entries (credits) wagered/bet/revealed determines the most amount of money that can be won by the customer for that specific iteration of play (Letter K). Most of the game themes require a minimum wager/bet/reveal of 25 credits to a maximum of 650 credits. f. The computer screen displays the amount of sweepstakes entries (credits) the customer has remaining from their original purchase (Letter A), the total amount of monies the customer has won from the total number of games played (Letter E) , the total number of entries (credits) the customer has wagered/bet/revealed for that particular iteration of game play (Letter G), and the total amount of money won (if any) for that particular iteration of game play (Letter J). In addition, the screen displays a 14 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 26 of 130 button for "buy internet time" (Letter B), "change the game" (Letter C), "help & prize table" (Letter D), "level" (Letter F), "entry" (Letter H). and "reveal" (Letter I). Figure 1.: Computer Screen Shot from Allied Veterans 0/ the World Affiliate 18 g. The customer then wagers/bets/reveals a specific amount of entries (credits) (Letter G) and clicks the reveal button (Letter I) to activate the iteration of play. The game then begins to spin on the computer monitor in the same fashion as a slot machine. The customer does not have the ability to use any form of skill to control the 15 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 27 of 130 spinning and/or outcome of the spin. The spin lasts approximately six (6) seconds, which is consistent with that of a slot machine. h. After approximately six (6) seconds, the computer screen displays if the customer has won any money (prize) or not (Letter J). If the customer has won any money, the total amount of money won is added to the customers "winnings" (Letter E) which is displayed on the computer screen. The customer continues to wager/bet/reveal his/her entries (credits) until all the entries (credits) have been wagered/bet/revealed. i. Once all of the customer's original entries (credits) are wagered/bet/revealed, the customer has the option of "buying" more "internet time" (Letter B) with their "winnings" (Letter E) (if the customer has any winnings) in increments of $1. For every $1 of "internet time" purchased, the screen gives the customer 100 entries (credits). It also deducts that dollar amount from the customer's winnings. j. If the customer has no more entries (credits) left to wager/bet/reveal, the customer must purchase more "internet time" in order to obtain more entries (credits) to wager/bet/reveal. The customer may purchase more "internet time" with their "winnings" in $1 increments. If the customer has no "winnings," the customer can purchase more "internet time" at an automatic "kiosk" machine or at the cashier counter. When the customer buys more "internet time," the computer reflects how many entries (credits) are received, not how many minutes of "internet time" were purchased. 16 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 28 of 130 k. If the customer decides to stop playing, the customer has a couple options. If the customer has no "winnings," they simply leave the establishment. If the customer has "winnings," they can go to the cashier counter and "cash out" and receive their "winnings" in cash from the employee. At some, but not all, of the locations, the customer is given a receipt that reflects the date, customer account number, "unique ID #," "sweepspoints," credits won (dollar amount of winnings), redemption amount (amount of money paid to customer) and credits remaining (amount not paid to customer). None of the receipts provided to the undercover agents and investigators reflected anything about the amount of "internet time" that was used or that remained. I. At many of the locations, when a customer "cashes out," the cashier only pays the customer his/her winnings in whole dollar increments. The remaining amount of winnings less than $1 are kept by the location as "credits remaining," which can only be played as opposed to being returned to the customer. 19. The two Internet Casinos located in Seminole County, Florida operate differently. On January 11, 2011, the Seminole County Commission enacted an ordinance to regulate "simulated gambling devices." For purposes of the ordinance, a "simulated gambling device" is defined as "any device, that upon connection with an object, is available to play or operate a computer simulation of any game, and which may deliver or entitle the person or persons playing or operating the device to a payoff." In response to that ordinance, the two Internet Casinos that operate in Seminole County provide "passwords" to the customers in lieu of "magnetic swipe cards". Starting in February 2013, the machines in those two locations also do not display spinning 17 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 29 of 130 wheels. Other than those changes. the manner in which those Internet Casinos are run is similar to the manner in which the other Internet Casinos are run. 20. During the course of the investigation, records were obtained from financial institutions for Allied Veterans and the companies in Florida involved in the operation of the Internet Casinos that used the Allied Veteran name. As explained in further detailed below. those financial records establish that the Internet Casinos that operated under the Allied Veterans name earned over $290 million from 2007 to January 5,2012. A review of financial records since that time confirms that. even after the alleged "sale" of the Internet Casinos by Allied Veterans, Allied Management continues to receive a portion of the funds earned through operation of the Internet Casinos identified in paragraph 5 above. Slot Machines 21. Florida law prohibits the possession or use of a slot machine, as follows (Fla. Stat. ? 849.15): (1) It is unlawful: (a) To manufacture, own, store, keep, possess, sell, rent. lease. let on shares. lend or give away, transport, or expose for sale or lease, or to offer to sell, rent. lease, let on shares, lend or give away, or permit the operation of, or for any person to permit to be placed. maintained, or used or kept in any room, space, or building owned, leased or occupied by the person or under the person's management or control. any slot machine or device or any part thereof; or (b) To make or to permit to be made with any person any agreement with reference to any slot machine or device, pursuant to which the user thereof, as a result of any element of chance or other outcome unpredictable to him or her. may become entitled to receive any money, credit, allowance, or thing of value or additional chance or right to 18 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 30 of 130 use such machine or device. or to receive any check, slug, token or memorandum entitling the holder to receive any money, credit, allowance or thing of value. 22. Under Florida law, a "slot machine" is defined as follows (Fla. Stat. ? 849.16): (1) Any machine or device is a slot machine or device within the provisions of this chapter if it is one that is adapted for use in such a way that. as a result of the insertion of any piece of money, coin, or other object, such machine or device is caused to operate or may be operated and if the user, by reason of any element of chance or of any other outcome of such operation unpredictable by him or her. may: (a) (b) 23. Receive or become entitled to receive any piece of money, credit, allowance, or thing of value, or any check, slug, token, or memorandum, whether of value or otherwise. which may be exchanged for any money. credit. allowance. or thing of value or which may be given in trade; or Secure additional chances or rights to use such machine. apparatus. or device, even though it may. in addition to any element of chance or unpredictable outcome of such operation. also sell. deliver. or present some merchandise. indication of weight, entertainment, or other thing of value. The Seminole County Sheriffs Office has retained D. Robert Sertell, who is qualified as an expert on gaming machines and their operating characteristics. Sertell is currently retained by Florida, Alabama, and Georgia to serve as their consultant/expert on gambling, gambling devices. and slot machines. Since 1980, Sertell has been qualified as an expert witness on several occasions, and has testified as such in federal and state courts. and before administrative tribunals in the United States and Canada. 24. Between January 9,2012 and January 13, 2012, Sertell. accompanied by investigators (as summarized in paragraph 18 above) visited forty-one (41) of the 19 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 31 of 130 Internet Casinos that operated in Florida using the Allied Veterans name for the purpose of determining whether the machines at those locations were slot machines under Florida law. Sertell has prepared an affidavit about his visits. In that affidavit, Sertell described his game play: I entered each of these facilities as a member of the general public, and identified myself to an employee as a new customer. I filled out the customer records form that was required, and gave the cashier $20.00 to "put on my card". The cashier created an account in my name within the master computer, and caused $20 worth of sweepstakes entries to be assigned to my account. I was also given an additional 100 entries that were described as my "free daily entries". In each facility I selected a vacant player station from those that were present, and used the computer mouse to click on the various "welcome" screens on the video monitor, as well as the two disclaimer screens which required the customer to "agree" before continuing. I was then presented with a series of screens that displayed a variety of game theme names and choices. I selected one, and proceeded to use that game display to "reveal" my sweepstakes entry outcomes. These game themes, which had names like Money Bunny, Smokin' 7s, Lucky Shamrocks, and Captain Cash, each resembled a spinning reel slot machine game having 25 different "win lines", and requiring the player to bet (reveal) at least 25 entries. Each iteration of game play went through the three steps of an acknowledged slot machine, those being kickoff, spin, and index. Each iteration of game play lasted approximately six seconds, just like an acknowledged slot machine. If an iteration of game play resulted in a winning combination, the winning amount was automatically added to my total on the "WIN' meter. just like an acknowledged slot machine. In order to begin each iteration of game play, the customer was required to bet / wager / reveal a minimum amount, just like an acknowledged slot machine. If the customer's total credits (sweepstakes entries) fell below the required minimum, they were unable to begin the next iteration of game play until they added (purchased) more, just like an acknowledged slot machine. 25. Based on his observations and his training and experience, Sertell concluded: "In my opinion. each of these locations was operating a gambling 20 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 32 of 130 establishment and the machines or terminals themselves constitute slot machines and gambling devices as defined by Florida statutes 849.16. The servers, databases and personal computers, when linked together and taken as a single system is a device adapted in such a way to constitute a 'slot machine' as described by Chapter 849.16." 26. Sertell explained in his affidavit some of the bases for his conclusion as follows (paragraph numbers from Sertell's report have been omitted): I recognized the software that was being used in each instance as being a product of International Internet Technologies, LLC., whose headquarters is listed at 106 East Kansas Avenue, Anandarko, OK 73005. The liT graphics are unique and obvious. The liT name is also displayed in text fashion at the bottom of each game's "welcome" screen." I have personally visited other establishments in Florida which were operating equipment and software that appear to be identical to these installations on several occasions. In all visits, I was able to enter the business as a member of the general public to play and observe as long as I wished. I obtained card from an employee on duty at the "point of sales terminal". The Point of Sale Terminals allow customers to purchase a quantity of Internet access minutes for their accounts, and to redeem any revealed winning sweepstakes 'prizes. The purchase of Internet minutes by a customer, triggers the system to give a customer promotional sweepstakes entries (credits) by associating them with the customer's account at the time of purchase. I used the credits identified by that card's magnetic strip to engage the video terminals in play. The computer terminals are modern computers that have been converted into gambling devices. They have been loaded with proprietary gambling software, and each has had its internal register "locked down", in such a fashion that all customers are forced to use only the pathways and programs that are available within the proprietary software. The computer terminals have attached swipe card devices that provide customers access by swiping their account access cards. The player stations reveal sweepstakes entries (credits). The player stations are designed to show sights and sounds that replicate those found on acknowledged Las Vegas type slot machines to heighten the suspense and excitement of play. 21 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 33 of 130 The promotion of the business and the business model appears to be to attract and then to entice the player to repeatedly keep playing over a period of time. The posters, flyers or sales literature for Internet access which were present were greatly overshadowed by advertisements within the business to "instantly win cash" prizes. The business model appears to want the customer to "play, enjoy and win cash". The video terminals are permanently set up so a customer can sit and playas long as he or she wants. The businesses offered free soda, coffee and snacks as an enticement to stay and play. The games offered for "fun" and "entertainment" were designed in bright colors, closely replicating screens found on acknowledged Las Vegas type slot machines. The player was able to immediately redeem his prize for cash at the establishment where the device is located. The intermittent reinforcement of being able to obtain a prize over a short period of time coupled with the ability to immediately obtain the winning cash from the establishment, has the effect on the player of keeping him playing the device. This design feature distinguishes the device from a standard vending machine where the enticement to the consumer is to purchase a product. Unlike a slot machine, there is no "fun" or "entertainment" associated with a standard vending machine. Even national promotions offered by a manufacturer will not entice a consumer to make multiple or numerous purchases at one time. The use of point of sale terminals to purchase Internet time and the use of electronic 'readers' does not remove the devices from the category of a 'slot machine' as described by Chapter 849.16, FSS. The electronic player stations which, when integrated with servers, central database, and related computer equipment, constitute a system involving sales of internet time in conjunction with chances to win cash prizes. This scheme violates the statute prohibiting possession of 'slot machines,' even though there was opportunity for free entries, and winning and losing entries were predetermined at the point of purchase, rather than at player stations. The system is a "slot machine" in that it is a device adapted for use within a particular computerized network, where the element of chance is as much a feature of the network system as of a stand-alone slot machine, and where the consumer pays for entries regardless of internet time acquired in conjunction with those entries. Each of the video terminals that I played offered the customer several video gambling scenarios that closely replicated those found on acknowledged Las Vegas type slot machines. There was no opportunity for the player to interject any 'skillful' choices or actions into the play of each game cycle. The customer was not able to predict or control the outcome of any game. Winning outcomes on the video terminals that I 22 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 34 of 130 played were entirely the result of chance. When I decided to stop playing, and to leave the establishment, my accumulated 'winnings' on the card were redeemed in cash by an employee of the establishment. I was not offered merchandise or gift certificates of any kind; I was simply given cash. These machines are server-based video gambling terminals. Customers purchase the right to engage these terminals in play; are not able to predict or control the outcome of any individual iteration of play; and may become entitled to receive cash as a result of the outcome of play. Overview of Fraud 27. As noted above, the machines in the Internet Casinos are slot machines under Florida law. In an effort to mislead the public into believing that it is not profiting from an illegal gambling enterprise, Allied Veterans and others have engaged in a conspiracy and scheme to defraud. Because of various challenges to the legality of its operations, Allied Veterans and the individuals involved in the operation of the Internet Casinos have, over time, changed the types of fraudulent representations that they have made. From the beginning of the time when Internet Casinos were operated using the Allied Veterans name until approximately April 2012, the conspiracy and scheme consisted of at least the following three categories of fraudulent representations: a. b. Misrepresenting to the public and governmental entities that the primary purpose of the Internet Casinos was to raise funds that would be donated to charitable causes; and c. 28. Misrepresenting to the public and governmental entities that the Internet Casinos were being operated by the Section 501(c)(19) organization, Allied Veterans; Misrepresenting the use ofthe funds by the Section 501 (c)(19) organization. In April 2012, Allied Veterans decided, in an effort to end the partiCipation of two of its "Affiliates" in a federal lawsuit that had been filed against Seminole County, 23 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 35 of 130 to claim, falsely, that it had "sold" its Internet Casinos. In fact, Allied Veterans "sold" the Internet Casinos to the same entities that were already operating them. The primary difference is that the names of the businesses have been changed. Allied Management still continues to receive its share of the revenue from the operation of the Internet Casinos, and the operation of the games continues as it has done before. 29. One constant throughout the operation of the Internet Casinos is the claim by Allied Veterans and those who operate the Internet Casinos that the games operate through the use of "finite pools." As part of its effort to deceive the public, governmental entities, and courts that its games do not constitute gambling, the entities and individuals who operate the Internet Casinos have claimed that the games are no different than the McDonald's Monopoly game. In particular, the entities and individuals who operate the Internet Casinos identified in paragraph 5 have represented, falsely, that an individual who receives a free entry has the same chance of winning the same type of prize as someone who pays for entries. That is not true. In fact, representatives of Allied Veterans, in response to investigations by the State of South Carolina, have admitted that the games reward players who pay for entries by making them eligible for higher dollar payouts than what is available to players who only receive free entries. The more an individual wagers on a game also affects the odds that the player has to win a cash prize. In other words, like a regular slot machine, the outcome of the games at the Internet Casinos depends on the choices made by the players, and the higher dollar prizes are reserved only for those who pay to obtain entries. 24 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 36 of 130 For-Profit Companies Have Always Operated the Internet Casinos 30. The primary purpose of the Internet Casinos has always been to make profits. From 2007 until April 2012, Allied Veterans and others attempted to disguise the profit motivation of the Internet Casinos by representing that the Internet Casinos were being operated by the Section 501 (c)(19) organization, Allied Veterans. As part of this effort, each Internet Casino that used the Allied Veterans name was numbered (i.e., Allied Veterans Affiliate 31, Allied Veterans Affiliate 32, etc.), and each "Affiliate" submitted filings with the Florida Secretary of State as a "not for-profit" corporation under Chapter 617, Florida Statutes. 31. As corporate entities, Allied Veterans and the "Affiliates" had little, if any, role in the day-to-day operation or management of any of the Internet Casinos. In fact, the "Affiliates" were not even non-profit corporations during the entire time that they claimed to be operating the Internet Casinos that used the Allied Veteran name. A non- profit corporation is required to either submit their own Form 990 or Form 990-T or to be included in the Form 990 return for a parent organization. I have reviewed the federal tax returns or transcripts for the "Affiliates." In 2007, the "Affiliates" were included in the Form 990 return for Allied Veterans. That changed in 2008. In 2008, the "Affiliates" each filed a Form 990-T and were not included in the Form 990 for Allied Veterans. That changed again in 2009. In 2009, the "Affiliates" each began filing a Form 1120, Income Tax Return for U.S. Corporations (referred to herein as the "Form 1120") with the IRS, which is the return that is filed by for-profit corporations. The "Affiliates" each filed a Form 1120 tax return for 2010. None of the "Affiliates" were included on the Form 990 for Allied Veterans for 2009 or 2010. 25 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 37 of 130 32. From 2007 until the alleged "sale" in April 2012, the "Affiliates" were little more than bank accounts that were used to distribute the proceeds from the Internet Casinos. During the course of the investigation, records have been obtained from financial institutions for Allied Veterans. the "Affiliates," and the for-profit companies in Florida involved in the operation of the Internet Casinos that used the Allied Veterans name. Based on a review of those records and other investigation. investigators have determined the following for the period from 2007 to April 2012: a. Each Internet Casino location had a separate bank account located at Bank of America. To date, investigators have identified over thirty (30) bank accounts at Bank of America for the various "Affiliates." None of those bank accounts belonged to Allied Veterans. Instead, each of them was opened using the name of the "Affiliate" from which the proceeds were deposited. Duncan was the sole signatory on each of these bank accounts. b. For each "Affiliate," the proceeds of the gambling operation were collected every day and deposited into each "Affiliate's" bank account. At the end of every week. the gambling proceeds were automatically transferred by ACH, through Employer's Resource Group, as follows: (1) the for-profit corporation that operated the Internet Casino (these corporations are identified in paragraph 5) received approximately 66%, (2) a for-profit corporation, Allied Management (the company that provided managerial and administrative support). received approximately 10%. 26 -.----~--------------- Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 38 of 130 (3) International Internet Technology (the company that provides the gambling software, which will be referred to herein as "liT") received approximately 25% of the net profit after Allied Veterans received its 10%). c. Any new "Affiliate" that was opened followed the same pattern. d. The pattern of the transfer of funds was the same for every "Affiliate," except Affiliate 46. e. Prior to April 2009 and prior to the formation of Allied Management, Allied Veterans received approximately 9.75% of the gambling proceeds, which were deposited into one of two accounts held by Allied Veterans. f. After the formation of Allied Management in March 2009, approximately 10% of the gambling proceeds earned by each "Affiliate" was deposited on a weekly basis into an account belonging to Allied Management. This bank account was opened at Bank of America in March 2009. Since then, the nonprofit entity, Allied Veterans, does not directly receive any proceeds from the Internet Casinos, but only receives whatever proceeds that Allied Management, at the discretion of Duncan, Bass, or others, decides to provide it. g. Allied Veterans did not pay any of the expenses associated with day-to-day operation of the Internet Casinos. All of those expenses, including salaries and rent, among other things, were paid for by the for-profit corporations identified above in paragraph 5. h. None of the employees who worked at the Internet Casinos using the Allied Veterans name were employed by, or paid, by Allied Veterans or any of the "Affiliates. " 27 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 39 of 130 33. For-profit corporations have always been the true operators of the Intemet Casinos as is reflected in paragraph 81. A set of depositions of Bass and the owner of Capital City Intemet Center, Inc. and Business Centers Unlimited Inc. (Reggie Medlen) confirmed that Allied Veterans and the "Affiliates" had little, if any, role in the day-to-day operation of the Intemet Casinos that used the Allied Veterans name. The following is a summary of pertinent portions: a. After the two Intemet Casinos that use the Allied Veterans name were opened in Leon County, a competitor filed a lawsuit against Affiliate 79 and Leon County (Southside Intemet Cafe. Inc. v. Allied Veterans of the World. Inc.. Affiliate 79. and Leon County. Florida, Case No. 2011-CA-1864, in the Circuit Court, Second Judicial Circuit, in and for Leon County, Florida). b. Bass was deposed on October 5,2011 in that lawsuit as a representative of Affiliate 79. In 2011, Leon County enacted an ordinance that requires the operator of a "simulated gambling facility" to submit an application for a permit. Bass signed the applications that were submitted for Affiliates 53 and 79. In his testimony, Bass stated, among other things, that he had "very little knowledge" about the application that he signed for Affiliate 79, that he did not know when the Affiliate started operation, and that his role was to "go over and ... inspect the location from time to time or just walk through, check procedures of operation." When asked who had records for the location, Bass responded, "Seventy-nine is the operational management team over there," and Bass represented that the team was "Reggie Medl[e]n." Bass' counsel advised, "I don't want to coach that, but that isn't the correct answer." 28 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 40 of 130 c. As was confirmed in a deposition of Medlen on October 13, 2011, Medlen did not work for Affiliate 79, but for two for-profit corporations called Capital City Internet Center, Inc. and Business Centers Unlimited Inc. Medlen testified that he was an "independent contractor" who had the responsibility of establishing and operating Affiliate 79. Medlen also was responsible for running Affiliate 53. Medlen explained that the role of Allied Veterans, with respect to Affiliate 53, was primarily limited to "[t]he interior, the appearance of the location," the "[e]xterior appearance of the location," "[t]he signage on the window," "[a]1I the information about Allied, the display information," and the selection of the software vendor (liT). Medlen explained that his company was not a franchise of Allied Veterans, but was the entity that operated Affiliate 53: Question: Is it your under - is it your response - total responsibility to open and operate the internet cafe? Medlen: I'm not sure. I don't think total. Question: All right. Well, what - is it your responsibility to operate that internet cafe? Medlen: Yes. d. Med len testified that the situation was the same with respect to Affiliate 79: Question: And related to 53, with regards to duties and responsibilities as they're related to your company versus Allied Veterans, are they pretty much the same in 53 and 79? Medlen: Yes. e. Medlen stated, later in the same deposition, that his company was the one that operated the "sweepstakes" at Affiliate 79: 29 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 41 of 130 Question: Medlen: Correct. Question: And you are the guys that operate the sale of the - you mean that corporation is the guy that operates the sale of the internet time, faxes, etcetera and the sweepstakes that are related to promoting that product? Medlen: 34. Capital City Internet City (sic) is the operator of the location for Affiliated Veterans 79, correct? Correct. In sum, from 2007 until the alleged "sale" of the Internet Casinos by Allied Veterans in April 2012, Allied Veterans had little, if any, role in the day-to-day operation of the Internet Casinos that used the Allied Veterans name. Since March 2009, Allied Veterans has not directly received any of the proceeds from the Internet Casinos. As noted above, almost all of the proceeds (98%) from the Internet Casinos were distributed on a regular basis to for-profit corporations. Since March 2009, Allied Veterans only receives, indirectly, whatever proceeds that the for-profit corporation, Allied Management, decides to distribute to it. The Internet Casinos Were Never a Charitable Drawing By Chance 35. From 2007 until the alleged "sale" of the Internet Casinos by Allied Veterans in April 2012, one of the ways that Allied Veterans attempted to deceive the public and governmental entities into believing that the Internet Casinos that used its name were legal was to claim, falsely, that a Section 501 (c)(19) organization operated the Internet Casinos. 36. Allied Veterans has used at least two websites (www.alliedvets.org and www.alliedveteransinc.com).Duringtheinvestigation.investigatorshavecopied.at various times, the web pages for those websites. On its websites, Allied Veterans' used 30 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 42 of 130 to claim that a Section 501(c)(19) organization operated the Internet Casinos. The following is a summary from a copy of the Allied Veterans' website on February 10, 2011 (www.alliedvets.org): a. The "Welcome" page represented as follows: We pride ourselves on being veterans helping veterans. Since 1979, Allied Veterans of the World has donated time, effort and money to veteran and first responder organizations around the country, primarily in the Southeast. We're here for veterans in need, and we proudly serve them contributions to Veterans Administration hospitals and clinics. We raise funds through bingo, car washes, internet centers and cookouts. b. The "About Us" page represented as follows: Allied Veterans of the World, Inc. & Affiliates is a 501(c)-19 nonprofit veterans' service organization and a member of the Veterans Administration. Headquartered in St. Augustine, Florida, the organization has 16 affiliates across the state. Its mission is to help fellow veterans, first responder organizations and other charitable organizations in need by contributing time, money and support services. Since Dec. 2007, Allied Veterans has donated more than $5.4 million to veterans, community and first responder organizations in the Jacksonville area. c. On the "Affiliates" page, Allied Veterans represented that it owned and operated the Internet Casinos: The Proceeds from our Affiliates Help Us Achieve our Mission The Affiliates of Allied Veterans of the World, Inc. are internet centers located primarily in Florida that are owned and operated by Allied Veterans of the World, Inc. The proceeds from these internet centers directly benefit VA Hospitals, VA Clinics, and other nonprofit groups, primarily first responder organizations, that Allied Veterans of the World, Inc. & Affiliates support. 31 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 43 of 130 d. On the webpage where a list of "Affiliates" was provided, Allied Veterans reiterated that it "owns and operates" the Internet Casinos: Allied Veterans of the World, Inc. owns and operates its own affiliates. The proceeds from our affiliates help us achieve our mission, veterans helping veterans. Our affiliates are Internet centers that are primarily located in Florida. Proceeds from our affiliate Internet centers help fund VA hospitals and clinics, non-profit groups and first responder organizations. Funds raised through sweepstakes games at these centers helped Allied Veterans of Worlds, Inc. & Affiliates donate more than $5 million to Florida charities and other organizations since 2007. 37. During the investigation, investigators have copied, on other occasions, Allied Veterans' websites, including on March 7, 2011, May 17, 2011, July 6,2011, and November 9, 2011 (forwww.alliedvets.org) and February 10, 2011, March 7,2011, May 17,2011, and July 6, 2011 (for www.alliedveteransinc.com). Similar representations as the ones that are summarized in paragraph 36 above were made on those dates. 38. Until the alleged "sale" by Allied Veterans of the Internet Casinos in April 2012, the locations of the Internet Casinos were set up in slJch a way to convince the public that the Section 501 (c)(19) organization was the one that was operating the Internet Casinos. I have been advised that, at each location that was visited by undercover investigators prior to the alleged "sale" in April 2012, many of the employees of the Internet Casinos wore shirts with an "Allied Veterans" logo, that some of the employees told the undercover investigators that the Internet Casinos were "Allied Veterans" locations, and that each location included photographs of Duncan, Bass, and others making donations on behalf of Allied Veterans, as well as letters of recognition to Allied Veterans from some of the charities that received donations. 32 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 44 of 130 39. One of the reasons why Allied Veterans, its employees, and others falsely claimed that Allied Veterans was operating the Internet Casinos was to deceive the public and governmental entities into believing that the Internet Casinos were being operated in a manner consistent with the Florida statute that authorizes charitable, nonprofit organizations to conduct a "drawing by chance." In the course of this investigation, investigators visited each location that used the Allied Veterans name to operate an Internet Casino. Prior to the alleged "sale" in April 2012, the following sign was posted at each location (some locations also included the address of Allied Veterans, while at least one location had a P.O. Box for the address): THIS IS NOT A GAMING ESTABLISHMENT THIS SWEEPSTAKES OPERATES UNDER FLORIDA STATUTE 849-0935 OPERATED BY ALLIED VETERANS OF THE WORLD, INC. & AFFILIATES A 501-C-19 40. The Florida Statute referenced in these signs provides that an "organization" that is exempt from taxation pursuant to Title 26, United States Code, Section 501 (c)(3), (4), (7), (8), (10), or (19) may conduct a "drawing by chance", as follows: (1) As used in this section, the term: (a) "Drawing by chance" or "drawing" means an enterprise in which, from the entries submitted by the public to the organization conducting the drawing, one or more entries are selected by chance to win a prize. The term "drawing" does not include those enterprises, commonly known as "matching," "instant winner," or "preselected sweepstakes," which involve the distribution of winning numbers, previously designated as such, to the public. (b) "Organization" means an organization which is exempt from federal income taxation pursuant to 26 U.S.C. s. 501(c)(3), (4), (7), (8), (10), or (19), and which has a current 33 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 45 of 130 determination letter from the Internal Revenue Service, and its bona fide members or officers. (2) The provisions of s. 849.09 shall not be construed to prohibit an organization qualified under 26 U.S.C. s. 501 (c)(3), (4), (7), (8), (10), or (19) from conducting drawings by chance pursuant to the authority granted by this section, provided the organization has complied with all applicable provisions of chapter 496. (3) All brochures, advertisements, notices, tickets, or entry blanks used in connection with a drawing by chance shall conspicuously disclose: (a) (b) The full name of the organization and its principal place of business. (c) The source of the funds used to award cash prizes or to purchase prizes. (d) The date, hour, and place where the winner will be chosen and the prizes will be awarded, unless the brochures, advertisements, notices, tickets, or entry blanks are not offered to the public more than 3 days prior to the drawing. (e) (4) The rules governing the conduct and operation of the drawing. That no purchase or contribution is necessary. It is unlawful for any organization which, pursuant to the authority granted by this section, promotes, operates, or conducts a drawing by chance: (a) To design, engage in, promote, or conduct any drawing in which the winner is predetermined by means of matching, instant win, or preselected sweepstakes or otherwise or in which the selection of the winners is in any way rigged; (b) To require an entry fee, donation, substantial consideration, payment, proof of purchase, or contribution as a condition of entering the drawing or of being selected to win a prize. However, this provision shall not prohibit an organization from suggesting a minimum donation or from including a statement of such suggested minimum donation on any 34 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 46 of 130 printed material utilized in connection with the fundraising event or drawing; (c) To condition the drawing on a minimum number of tickets having been disbursed to contributors or on a minimum amount of contributions having been received; (d) To arbitrarily remove, disqualify, disallow, or reject any entry or to discriminate in any manner between entrants who gave contributions to the organization and those who did not give such contributions; (e) To fail to promptly notify, at the address set forth on the entry blank, any person, whose entry is selected to win, of the fact that he or she won; (f) To fail to award all prizes offered; (g) To print, publish, or circulate literature or advertising material used in connection with the drawing which is false, deceptive, or misleading; (h) To cancel a drawing; or (i) To condition the acquisition or giveaway of any prize upon the receipt of voluntary donations or contributions. (5) The organization conducting the drawing may limit the number of tickets distributed to each drawing entrant. (6) A violation of this section is a deceptive and unfair trade practice. (7) Any organization which engages in any act or practice in violation of this section is guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083. However, any organization or other person who sells or offers for sale in this state a ticket or entry blank for a raffle or other drawing by chance, without complying with the requirements of paragraph (3)(d), is guilty of a misdemeanor of the second degree, punishable by fine only as provided in s. 775.083. (8) This section does not apply to the state lottery operated pursuant to chapter 24. 35 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 47 of 130 41. None of the corporations that operated the Internet Casinos using the Allied Veterans name qualified as an "organization" for purposes of application of this statute. None of the "Affiliates" were tax-exempt organizations after 2008, and the for- profit corporations that operated the Internet Casinos on a day-to-day basis had always been for-profit corporations. As a result, the Internet Casinos were not in compliance with Florida Statute 894.0935, because none of them was being operated by a qualifying "organization." 42. Even if a qualifying "organization" was operating the Internet Casinos, the Internet Casinos did not comply with other provisions of Florida Statute 894.0935. For example, under the drawing by chance statute, an operator may not "arbitrarily remove, disqualify, disallow, or reject any entry or to discriminate in any manner between entrants who gave contributions to the organization and those who did not give such contributions." The Internet Casinos and their employees, however, represent to the public that individuals who pay to gamble can win larger prizes that those who just use the 100 "free" entries. During the undercover visits to the Internet Casinos, the slot machines represent that the top prize is $13,000, which requires 650 entries (which is 550 entries more than a customer can receive for free). The employees of the Internet Casinos use that representation to encourage customers to bet more. For example, undercover agents conducted a visit of Affiliate 31, located in Lake County, Florida, on December 1, 2011. One of the agents won a large prize (over $630) on one spin. The manager and another employee, both independent of one another, told the undercover agent that if he had bet the maximum of entries he would have won additional money. 36 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 48 of 130 The maximum number of entries for that game was greater than the 100 "free" entries that are provided. Allied Veterans Falsely Claimed to be a Member of the Veterans Administration 43. In an effort to deceive the public about the legitimacy of its operation, Allied Veterans falsely claimed, prior to the alleged "sale" of the Internet Casinos in April 2012. that it and its "Affiliates" were members of the Veterans Administration. On the "About Us" page of its website, Allied Veterans represented that "Allied Veterans of the World, Inc. & Affiliates is a 501 (c)-19 nonprofit veterans' service organization and a member of the Veterans Administration." Allied Veterans included a similar representation on its Facebook page (which was downloaded on March 7, 2012). In a newsletter that it disseminated, Allied Veterans included the following for its address: Allied Veterans of the World, Inc. & Affiliates MEMBERS OF VETERANS ADMINISTRATION, V.A.V.S. To support its claim that it was somehow a "member" of a governmental agency, Allied Veterans included in its newsletters and on its web pages information about its donations to various "Veterans Administration hospitals and clinics." 44. Special Agent McCabe has talked with a criminal investigator at the United States Department of Veterans Affairs (VA). Allied Veterans has never been a member of the "Veterans Administration," and it has never been an accredited Veterans Service Organization. Allied Veterans has never been a part of the VA and never had any special status from the VA. 45. Allied Veterans also has no special status with the Florida Department of Veterans Affairs. In a newspaper article on www.tbo.com on December 11, 2011, 37 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 49 of 130 "Steve Murray, a spokesman for the state Department of Veterans Affairs, said Allied Veterans is no way affiliated with, or has interacted directly with, his agency." "Nonprofit Internet cafes' history long, cloudy," www.tbo.com(Dec.11 ,2011). Allied Veterans Misrepresented the Purpose of the Internet Casinos 46. During the time when Internet Casinos using the Allied Veterans name were operated until the time of their alleged "sale," Allied Veterans and others acting on its behalf represented to the public and various governmental entities that Allied Veterans was using the Internet Casinos to raise money for charitable purposes. 47. In 2007, the Agriculture Department opened an investigation into the fund raising activities of Allied Veterans. In response, on September 18, 2007, Kelly Mathis of Mathis & Murphy, P.A. (referred to herein as the "Mathis law firm") sent a letter to the Agriculture Department on behalf of his client, Allied Veterans. The following is a summary of pertinent portions of that letter: a. Mathis stated that Allied Veterans was a non-profit veterans group that had an "innovative form of fund raising" that would "help further its civic and charitable purposes:" To fund its mission and programs Allied Veterans relies on charitable fund raising. Allied Veterans believes that its innovative form of fund raising will help further its civic and charitable purposes. Many of the affiliates of Allied Veterans engage in sweepstakes operation for fund raising. b. Mathis explained that Allied Veterans was a Section (c)(19) non- profit organization that was registered to solicit contributions with the Agriculture Department. Mathis described Allied Veterans' "innovative fund raising method" as follows: 38 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 50 of 130 Allied Veterans utilizes an innovative fund raising method which involves operation of a sweepstakes. However, rather than utilizing a drawing, pull-tab, scratch-off tab, or information contained on the inside of a bottle cap to reveal winners, the Allied Veterans sweepstakes utilizes a computer to reveal whether the entrant is a winner with audio and video images on the screen. This approach also provides entertainment value. Allied Veterans hosts the operation of what is essentially an internet cafe or internet center. Allied Veterans Affiliates contract with private companies to provide management and operations services for the internet venture. Payment to these private companies is based on a percentage of revenue. *** To promote the sale of internet access time, the use of its facility and solicit direct contributions, Allied Veterans provides a sweepstakes or electronic scratch off game. The entries are electronically encoded into the card at the time of purchase. The electronic card readers on each of the computers can be used to reveal the results of the entries. The sweepstakes or scratch off entries are provided free of charge. Additionally, there is no charge to use the computer to reveal the results of the electronic scratch off nor does it reduce the available internet time. c. Mathis argued in his letter that the Allied Veterans' "fund raising operation meets all requirements of Florida law." In particular, Mathis asserted that the "fund raising operation" was a lawful game promotion and that it did not violate the laws against slot machines in Florida. d. 48. The Agriculture Department closed its investigation in 2008. Allied Veterans' claim that it used Internet Casinos to raise money to help further its civic and charitable purposes was one that was repeated by Allied Veterans on several occasions, including the following: 39 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 51 of 130 Source of ReRresentation "First Coast veterans group gifts more than $1 million in donations, " www.jacksonville.com (Nov. 10,2009). Quotation from Source Without mentioning the lawsuit, Mathis touched on the recent controversy while addressing the crowd of about 350 lunching in the hotel ballroom "Sometimes they get the question, 'How on earth do you raise so much money? It's got to be illegal," he said of the veterans group. "Well, folks, I'm here to tell you it's not. ... It's something 10 years down the road, people will say, 'Why didn't I think of it first?" Mathis said the group had "a higher mission" when it came to turning profits. "Legislature again defers action to shut illegal arcades," www.verobeach32963.com (Mar. 8, 2012). "Nonprofit Internet cafes' history long, cloudy," www.tbo.com (Dec. 11, 2011). "Officials leery of Internet cafe request," www.news- journalonline.com (Mar. 24, 2011) "We're going to take that money and use it to help vets," Mathis said. [Michael] Davis [Secretary of Allied Veterans] said the money given to veterans groups, which according to its tax filings include a $32,000 donation to the Homeless Family Center in Vero Beach, is raised through the internet cafes. 'Whenever I look into the eyes of these veterans I see the good work that we are able to do. It's hard for me to believe that what we are doing is wrong," Davis said. In its 2010 tax returns, Allied Veterans' administrative arm listed its revenue as $2.4 million. But the group didn't list how much money its 40 affiliates raked in that year. said [Daniel] Borochoff, president of the American Institute of Philanthropy. Michael Davis, Allied Veterans secretary, said his group has donated about $6 million to charities since 2007. The money is generated through Internet cafes, he said. [Allied Veterans attorney Laurie] Lee said 97 percent of the organization's members are required to be veterans or spouses of veterans. While not giving numbers, she cited veterans' health care as the main charitable activity, with the largest donations going to hospitals, clinics and nursing homes, as well as high school ROTC programs and scholarships. 40 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 52 of 130 "The reason they went into operating Internet centers was they wanted to raise more funds. The old-fashioned way of raising funds was drying up. Their population was aging," Lee said of the membership. ''They did not want to close their doors ... and this is one of the ways they chose to do it." 49. As part of its effort to deceive the public and governmental entities into believing that the Internet Casinos were being operated for charitable purposes, Allied Veterans referred to its Internet Casinos locations as "fundraising centers." For example, in a Complaint for Declaratory and Injunctive Relief filed against the State of Florida to "restrain[], enjoin[], and prohibit!] the State from interfering or impeding Allied Veterans from the valid and lawful operation of its fundraising method," Allied Veterans noted that the Sheriffs Offices in Pinellas County and Jackson County had executed search warrants at two "fundraising center[s]" that had been "maintained" by Allied Veterans and that the Marion County Sheriff's Office had "advised the manager on duty that the failure to close the location immediately would result in the arrest of all persons associated with the operation and the seizure of the personal property and assets at that location[.]" In describing each location in those three counties, Allied Veterans represented that "Allied Veterans conducted a fundraising project from its location ... to fund its mission and programs as charitable and civic fundraising." This Complaint was signed by Mathis in August 2009. By that date, Allied Veterans was receiving no direct proceeds from the Internet Casinos. The Complaint was dismissed by the Circuit Court in 2009, which was affirmed on appeal in 2010. 41 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 53 of 130 50. Allied Veterans also claimed that the parties operating the Internet Casinos had no profit motivation, including in testimony at a January 11, 2011 meeting of the Seminole County Commission: Commissioner: Could you give me a ballpark figure as to how much revenue that your organization took in last year. Mathis: I don't know the exact numbers. Commissioner: Just ballpark. Mathis: Mr. Bass may know. I know its quite a bit. There are about 35 locations statewide, and I know its several million dollars. I know in the last four years, you pointed out we started in 1979, but in the last four years we've contributed over $5,000,000 to veterans and veteran services, almost all of which has stayed here in the State of Florida. A lot of- Commissioner: That's why I asked if you could give me an idea of what the ballpark on your revenue is. I'm looking for the percentage that you give away. Because this is supposed to be a non-profit organization, but it seems like it could be very profitable at 30 cents a minute. Mathis: Well, it certainly could be very profitable, and there are a lot of businesses that operate as a for-profit business. Allied Veterans simply chooses not to. The statute allows for-profit businesses to take the money and stick it in their pocket. And Allied Veterans could under the law do the same thing. The sweepstakes statute was designed to promote businesses. MeDon aids, Coke, everybody else that use sweepstakes, they take the sales and they put the money in their pockets. Allied Veterans simply does not do that. 42 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 54 of 130 51. Allied Veterans' claim that it did not have a profit motivation and that it used Internet Casinos to raise money to help further its civic and charitable purposes was false. After March 2009 until the alleged "sale" of the Internet Casinos by Allied Veterans in April 2012, approximately 98% of the proceeds earned by the gambling operation were paid out, on a weekly basis, to several for-profit corporations. The only proceeds that Allied Veterans received were those that were transferred from Allied Management, which is a for-profit corporation. From 2007 to January 5,2012, the amount of money donated to charity by Allied Veterans was approximately 2% of the total revenues that had been received. 52. In a complaint for declaratory relief filed by the "Affiliates" of Allied Veterans against the Agriculture Department in November 2011 in the Seventh Judicial Circuit for St. Johns County, Allied Veterans' counsel, Mathis, admitted that Allied Veterans and its "Affiliates are not "charitable organizations" within the meaning and intent of the Florida Solicitation of Contributions Act. The "Affiliates" filed this lawsuit after Allied Veterans refused to provide certain financial information that it was required, as a registrant under the Solicitation of Contributions Act, to give to the Agriculture Department. The following is a summary of pertinent portions of this complaint: a. According to the complaint, Allied Veterans "was not organized for the purpose of engaging in charity or performing charitable acts." The complaint stated that "Allied Veterans does not ask for donations from anyone, nor does it accept donations from anyone" and that Allied Veterans is "not obligated or required to make charitable donations or perform any other charitable act." Instead, "[a]ny charitable act 43 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 55 of 130 performed by Allied Veterans with their own resources are purely voluntary in nature and alone do not qualify Allied Veterans as a 'charitable organization." b. The complaint makes similar statements about the "Affiliates." In the complaint, the "Affiliates" acknowledge that they are not tax-exempt, and the Affiliates state that "[t]hey are not included in the group exemption from tax granted to Allied Veterans under ? 501(c)(19) of the Internal Revenue Code." According to the complaint, "Internet Centers [which is the phrase used in the complaint to describe the "Affiliates" collectively] do not collect donations from anyone, nor do they accept donations from anyone." The "Affiliates" state that they are "not obligated or required to make charitable donations or perform any other charitable act." Instead, the Affiliates state that "[a]ny charitable acts performed by Internet Centers with their own resources are purely voluntary in nature and alone do not qualify Internet Centers as 'charitable organizations. '" c. In the complaint, the "Affiliates" admit that Allied Veterans does not own any of them, but that they are "independently incorporated entities" that operate the Internet Casinos: Internet Centers are not "owned" by Allied Veterans but rather are independently incorporated entities which operate a business in the form of internet centers. A nonprofit corporation may neither pay dividends nor distribute income or profits to its members. The "Affiliates" also admit that they file Form 1120 tax returns, which are used by forprofit corporations. 53. Until the alleged "sale" in April 2012, Allied Veterans represented to the public and governmental entities that the Internet Casinos that use its name were 44 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 56 of 130 nothing more than an "innovative form of fund raising" that would "help further its civic and charitable purposes." Those representations were false. As acknowledged in the St. John County complaint for declaratory relief, the Internet Casinos were not operated by Allied Veterans. Instead, the Internet Casinos were operated by for-profit corporations for the purpose of making profits, a portion of which could be given, as the discretion of Duncan or Bass, to Allied Veterans for possible donation. Allied Veterans Misrepresented the Percentage of Its Funds that Went to Charity 54. As part of its scheme to defraud the public and governmental entities, Allied Veterans claimed that a large proportion of the proceeds earned from its gambling operations went to charitable, veterans-related purposes. This claim was one that was consistently made by Allied Veterans and others on its behalf. For example, it was included in the September 18, 2007 letter that was mailed to the Agriculture Department: Sweepstakes or electronic scratch off entries will be available free of charge on request. Neither a contribution to Allied Veterans nor the purchase of internet time is required to participate. Winning entries will be paid out on a "pay as you go" system. That is, all winning entries will be paid at the time they are revealed. All prizes will be awarded. All net proceeds will be used by Allied Veterans in furtherance of its designated civic and charitable purposes. 55. The claim that "[alII net proceeds will be used by Allied Veterans in furtherance of its designated civic and charitable purposes" was one that has been repeated by Allied Veterans. An almost identical statement ("All net proceeds are used by Allied Veterans in furtherance of its designated civic and charitable purposes.") was included in a June 4, 2010 letter to the Seminole County Attorney's Office that was sent by United States Mail and in a document that was obtained during an undercover 45 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 57 of 130 inspection to Affiliate 44 in Duval County, Florida on January 11, 2012 as one of the promotional materials that are provided to customers of that Internet Casino. 56. Allied Veterans and others on its behalf made similar representations about the percentage of proceeds that were donated to charitable causes, with representations of the amount that was donated ranging from 70% to "most" of the proceeds: Source of Rel;!resentation "Two Jackson County Businesses Busted for Internet Gambling," www.wctv.tv (May 26, 2009). "Attorney: AVA is a legal business," Hernando Today, www2.hernandotoday.com (May 27,2011). "Attorney: AVA is a legal business," Hernando Today, www2.hernandotoday.com (May 27,2011). "Another Internet Cafe Going Online," WCJB TV-20 (Jan. 12,2012). "Monument to honor fallen solider," Www.newsiournalonline.com I(Jan. 28, 2011). "Residents voice concerns over planned Internet cafe," www.gainesville.com (May 21,2011). Quotation from Source He [Kelly Mathis] claims his client is a legitimate business, an internet cafe that allows people to pay for internet time by the minute. He also claims his client donates 100% of the proceeds to Allied Veterans. He [Kelly Mathis] also doesn't like to hear AVA [Affiliates of Allied Veterans] locations referred to as gaming rooms. AVA sells Internet time and donates most of its revenue to charity, he said. "AVA so far has been able to raise quite a bit of money," he said. After expenses, roughly 80 percent of AVA's revenue goes toward ROTC scholarships, food banks, the Wounded Warrior Project and various health care programs, Mathis said. "Mathis says 70 percent of the profits are given to VA hospitals and ROTC scholarships." Allied reports 88 percent of money raised from the cafes through sale of Internet time promoted with sweepstakes is paid out to worthy causes. Mathis and Bass said Allied Veterans operates 37 Internet cafes, primarily in Central and North Florida. They said they do not know the gross revenues of the centers, but Mathis said about 70 percent of the gross toward prize payouts. 46 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 58 of 130 "Allied Veterans' operations probed," www2hernandotoday.com (Mar. 31, 2010). He said after expenses for prizes, rent, personnel and other costs, 70 percent of the profit goes to programs, scholarships and charities that help veterans. Allied Veterans of the World registered nearly a $56,000 loss in 2008, according to records filed with the Florida Department of Agriculture and Consumer Affairs. In spite of those numbers, a company attorney and executive claimed it generated enough revenue during the past few years to donate more than $5 million to charities and ROTC scholarships. After rent, expenses and prize money are paid, more than 80 percent of the company's proceeds go to charity, said attorney Kelly Mathis. "What we do is completely compliant with Florida law," he said. 57. Using any measure of revenue, Allied Veterans' claims about the amount of charitable donations that it had made prior to the alleged "sale" in April 2012, when compared with the amount of money that had been generated, were false. I have reviewed the Allied Management Agreement that was signed by all the Affiliates under the Allied Veterans umbrella of Internet Casinos. This agreement allowed Allied Management to provide managerial and administrative support for a fee. This agreement also stated in part that each Affiliate will pay Allied Management 2% a week as a charitable donation. This arrangement is contradictory to statements made above by Allied Veterans about how much of the funds were actually donated. 58. The Agriculture Department publishes on its website a "Florida Charities Gift Givers' Guide," which provides financial information about non-profit entities, such as Allied Veterans, that are registered with the Agriculture Department to solicit charitable donations. For Allied Veterans, the Agriculture Department reports the following information: 47 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 59 of 130 Total Revenue $596,696 Program Services Expenses $4,320 1% Total Expenses $601,027 Administrative Expenses $594,207 99% Surplus/Deficit -$4,331 Fund-raising expenses $2,500 0% 59. Some newspaper articles have used these figures. In response, Allied Veterans has represented that the information provided by the Agriculture Department was not complete: Source of Re~resentation Quotation from Source "Internet cafe planned near Tower and Newberry roads," The Gainesville Sun (July 13,2011). "The figure on the Dept. of Agriculture site is not complete," attorney Kelly Mathis wrote in an email. "Most of the money donated by Allied Veterans is raised by its Affiliates and the donations are made by the parent organization on behalf of the Affiliates. The contributions made by the Affiliates are not included in the parent organization figures based on the procedures employed by the Department." "Internet cafe that raises Asked about the small amount of money on the 990 money for veterans promotes compared with more than $1 million donated in the fall of gambling, group says," 2010, Bass said there were other 990s that had not been www.tcl2alm.com (Mar. 18, reviewed. He said one form was filed for each of the 2011 ). affiliates, but Liz Compton of the Florida Department of Agriculture's Consumer Services Division, said only one Allied 990 is on file in Tallahassee. 60. Allied Veterans also claimed that most of the charitable contributions were made by the "Affiliates" as opposed to Allied Veterans: Source of Re~resentation Quotation from Source "Planning Commission votes against Internet cafe," The Gainesville Sun, www.gainesville.com (Aug. 17,2011). According to the group's website, $5 million has been donated since 2007. Its 2009 990 tax filing with the Internet Revenue Service reported close to $597,000 in revenues and a contribution of only $4,320 toward the services for which it raised money. More than $594,000 went toward administration. According to the IRS filing, the Allieq Veterans' national commander at the time, Johnny Duncan, had an annual 48 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 60 of 130 salary of $345,000 from the parent organization and $160,000 from related organizations. Jerry Bass, the senior vice commander at that time, had an income of $165,000 from Allied Veterans and related organizations, according to the filing. That 990 filing also listed a 2008 Cadillac Escalade and a 2008 Lexus as assets. Mathis said the IRS return did not provide full details on donations. "Internet cafe chain leader built on a checkered bingo past," St. Petersburg Times (Oct. 23, 2011). 61. It did not reflect donations made by the parent organization's affiliates, he said. There are at least three dozen affiliates in Florida. So where is the money for Allied's contributions coming from? Mathis said most of the contributions are made by the group's "affiliates," which Allied describes as its Internet centers. Special Agent McCabe I has reviewed records of the bank accounts of the "Affiliates" and has seen no checks for charitable contributions by any of the "Affiliates." The only checks for charitable donations that have been found so far by investigators were for accounts belonging to Allied Veterans. The Management Agreement that the Affiliates signed with Allied Management states that the Affiliates will pay Allied Management 2% per week as a charitable donation. Based on that agreement and the corresponding bank records, Allied Management collected money from the Affiliates and then transferred funds to Allied Veterans, which in turns made the charitable donations. Because the Affiliates and Allied Management are for-profit corporations, this information is not publicly available. 49 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 61 of 130 62. One result of these, and the other, misrepresentations is that the public believes that the money that they lose is helping a veterans organizations: Source Quotation from Source "Internet cafe that raises money for veterans promotes gambling, group says," www.tcQalm.com (Mar. 18, 2011). "But even if I lost, I will because I see the list of veterans groups they support," he [Tim Riney] said. "My losses help those groups." Petitions submitted to the Seminole County Commission on January 11, 2011 Comments include (initials are provided as opposed to the full names): "Benefits others", A.M. "Good cause", R.W. "This is for a good cause", M.D. "Nice way to donate," K.P. "Allied Veterans truly is a great organization & a great cause. It can provide economic stimulation required to boost our economy & give jobs to more than 50+ people.", M.C. "Please do not judge a book by its cover. The Cafes offer entertainment, social meeting places and provide badly needed assistance for Veterans in Central Florida.", D.O. "Let the internet centers alone. They do so much for all the Vets in all areas.", K.M. "Allied Veterans donate a great deal of money to the veterans.", P.O. Allied Veterans Changes Its Corporate Structure 63. From the time that Internet Casinos that used the Allied Veterans name began operation in Florida until their alleged "sale" in April 2012, Allied Veterans and so Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 62 of 130 others attempted to use the fact that Allied Veterans is a non-profit veteran's organization as a shield against scrutiny of the operation of the Internet Casinos. A key component of this strategy was to misrepresent to the public, governmental entities, and courts that the purpose of the Internet Casinos was to raise money, most of which would be donated to charitable purposes. Because Allied Veterans publicized the approximate amount of its donations, Allied Veterans and the others who operated the Internet Casinos had to conceal the true amount of revenue that was being earned, so that the public and governmental entities would not be able to figure out the small percentage of funds that were actually being donated or the fact that the recipients of most of the funds were for-profit corporations. 64. As noted above, Allied Veterans, Allied Management, and several for- profit corporations received over $290 million in proceeds from the Internet Casinos from 2007 to January 5, 2012. That is the amount of proceeds received after prize payouts were made. The following is a breakdown of the entities that received those proceeds for 2008 to 2011 : Year 2008 2009 2010 2011 Entitv Allied Veterans For-profit corporations that operate the Internet Casinos liT Allied Veterans Allied Management For-profit corporations that operate the Internet Casinos liT Allied Management For-profit corporations that operate the Internet Casinos liT Allied Management 51 Approximate Amount $5 million $36 million $11.4 million $1.3 million $5.7 million $48.2 million $15.7 million $8.3 million $53.2 million $18.3 million $8.1 million Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 63 of 130 For-profit corporations that operate the Internet Casinos liT 65. $58.3 million $17.5 million On a percentage basis, Allied Veterans and/or Allied Management only received a portion of the illegal gambling proceeds during this period of time (approximately 10%). The majority of the illegal gambling proceeds (approximately 66%) went to the for-profit corporations that operated (and currently operate) each location, with the additional illegal gambling proceeds going to the provider of the gambling software, ITT (approximately 25%). As noted above, only a small fraction (about 2 percent) of what was earned from the Internet Casinos that used the Allied Veterans name was actually donated to charity, which is consistent with the Management Agreement that each Affiliate signed with Allied Management (see paragraph 57). 66. As a tax exempt entity that makes over $50,000 in gross receipts, Allied Veterans is required to file a Form 990. As noted above, the amount of gross receipts is considered to be the total amount the organization received from all sources during its annual accounting period, without subtracting any costs or expenses such as gaming prizes, payouts or other expenses. In addition, Allied Veterans must also file a Form 990-T to report, and pay tax on, unrelated business income, which is income from a trade or business regularly carried on, that is not substantially related to the purpose that are the basis of an organization's exemption. Net income from income producing activities is taxable if the activities constitute a trade or business, are regularly carried on, and are not substantially related to the organization's exempt purpose. 52 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 64 of 130 67. In contrast, the Internal Revenue Code requires non-tax exempt corporations to file a Form 1120. Taxable income for a corporation is calculated by subtracting from gross income all of the deductions that are allowed by the IRS. A corporation's annual income tax is calculated from its taxable income. 68. Form 990 tax returns are available for the public to access and review. Some of these forms are available on Internet sites, such as www.guidestar.org. Organizations that file a Form 990 are required to make those returns available for public inspection, with the exception that certain schedules and attachments are not required to be made available. Form 1120 tax returns are not publicly available, and corporations that file such returns are not required to make them available for public inspection. 69. As part of its effort to hide from the public and governmental entities the true amount of money that was being made by the Internet Casinos and the recipients of those revenues, Allied Veterans' did not disclose the total revenue on IRS Form 990 tax returns (which are available for public inspection) in 2008. In addition, in 2009, Allied Veterans made an organizational change to help it from having to disclose to the public, in its Form 990 tax return filings, the true earnings of the entire operation of Internet Casinos. The following is a summary of that change: a. In 2009, Duncan formed Allied Management, a for-profit corporation, which was going to handle the management and administrative duties of each "Affiliate." Also at this time, each "Affiliate" became its own separate for-profit corporation - out from beneath the umbrella of the Central Organization (Allied 53 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 65 of 130 Veterans). Allied Veterans became the 100% owner of Allied Management (and therefore still controlled the flow of the illegal gambling proceeds). b. This information was kept hidden from the public through misrepresentations (some of which have been summarized above), and, as far as the public was aware, Allied Veterans continued to operate the Internet Casinos as it had before. Allied Veterans continued to use the same signage, continued to deceive the public with misinformation in newspaper articles and public hearings about how much money was generated by the Internet Casinos, continued to use their website to make false representations about the organization, and continued to generate huge profits through Allied Management and the Affiliates (which would be shielded from public scrutiny and be used to enrich the insiders of the organization). From 2009 forward, the only money that Allied Veterans would receive was from money given to it from Allied Management at the discretion of Bass and/or Duncan. Allied Veterans Uses Its Funds Improperly to Benefit Duncan, Bass, and Others 72. The private inurement prohibition under Section 501(c) of the Internal Revenue Code precludes individuals who have close relationships with and the ability to exercise control over a Section 501(c) public charity from benefitting unfairly or unreasonably from that charity's income or assets. The most common type of private. inurement is excessive compensation paid to insiders. There are, however, many other forms of private inurement that can also result in the revocation of a charity's tax-exempt status and/or in the imposition of financial penalties known as "intermediate sanctions." The courts and the IRS have consistently ruled that any unreasonable benefit or inurement, however small, is impermissible. 54 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 66 of 130 73. Duncan, Bass, and others have personally benefitted from the money received by Allied Veterans. For 2007 through 2011, Duncan received over $1,500,000 in checks directly from Allied Veterans or Allied Management, while Bass received over $250,000. Duncan and Bass have also used the funds of Allied Veterans in other ways to benefit themselves personally, including, among other things, purchasing beachfront condominiums, commercial buildings, and homes. Some of these transactions are referenced in the charts in paragraph 121 below. Allied Veterans' Alleged "Sale" of the Internet Casinos 74. At various points in time, Allied Veterans has been directed to disclose information about its finances. The response of Allied Veterans has been consistent, which is to refuse to provide the information and, if necessary, to file a lawsuit. When faced with having to provide financial information in discovery, Allied Veterans has also dismissed lawsuits rather than turn over the requested financial information. 75. For example, "Affiliates" of Allied Veterans filed a lawsuit against the City of Longwood after search warrants had been executed at some of the Internet Casinos that used the Allied Veterans name in Longwood. I have been advised that, after Allied Veterans was directed to provide some financial information as part of the discovery in that case, the "Affiliates" decided to dismiss the lawsuit and discontinued operations in Longwood. 76. As noted above, Allied Veterans filed a lawsuit in November 2011 to avoid having to provide certain financial information to the Agriculture Department as a registrant under the Solicitation of Contributions Act. It was in that lawsuit that Allied Veterans was forced to acknowledge that Allied Veterans ''was not organized for the 55 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 67 of 130 purpose of engaging in charity or performing charitable acts" and that Allied Veterans did not own any of the Affiliates. 77. On January 11, 2011, the Seminole County Commission enacted an ordinance to regulate "simulated gambling devices." In response, in February 2011. the two Internet Casinos that used the Allied Veterans name in Seminole County. Florida filed a lawsuit in the Orlando federal court to enjoin enforcement of the ordinance (Allied Veterans of the World, Inc.: Affiliate 67 et al. v. Seminole County, Florida et aI., Case No. 6:11-cv-155-28GJK, in the United States District Court for the Middle District of Florida). On May 6. 2011, the District Court denied a motion for a preliminary injunction that had been filed by the two "Affiliates." I have been advised that Seminole County requested certain financial information from the Affiliates and that the Magistrate Judge entered an Order on May 2, 2012 directing the "Affiliates" to produce certain financial and other information. Rather than provide the requested financial information. the "Affiliates" filed a Motion for Voluntary Dismissal on May 15. 2012. The following is a summary of that Motion: a. In the Motion, the two "Affiliates" claimed that they had sold the Internet Casinos located in Seminole County and that, as a result, they no longer had any legal interest in the lawsuit. b. In support of the Motion, Bass submitted an affidavit in which he represented that he is the President of "Affiliates" 67 and 74 and that, on November 16, 2011. Allied Veterans received notification of termination effective April 2012 of its exclusive software license for the operation of an electronic sweepstakes in Florida. As a result of the termination of its exclusive software license and other significant factors, 56 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 68 of 130 Bass stated in his affidavit that Allied Veterans had decided to focus on its charitable and philanthropic endeavors to assist veterans (including primarily the development of veterans homeless centers like the one established by Allied Veterans in Jacksonville, Florida) and to discontinue operation of internet centers, including "Affiliates" 67 and 74 in Seminole County. c. Bass claimed in his affidavit that, after receiving notice of the termination of its software license, Allied Veterans sought buyers for the various locations and that the ownership of the locations was transferred to Digitrac, Inc. Bass represented that, as of April 30, 2012, "Affiliates" 67 and 74 "ha[ve] no ownership interest in the internet centers" in Seminole County "nor any rights to proceeds from the operation of these businesses." d. The President of Digitrac, Inc., Aamir Waheed also submitted an affidavit in which he represented that Digitrac, Inc. had purchased the locations in Seminole County, Florida. 78. Bass and Waheed failed to disclose in their affidavits that Digitrac, Inc. was the one that had been operating the Internet Casinos in Seminole County during the entire pendency of the federal court litigation. A review of the bank account of Allied Management for the months of September 2012 through November 2012 reveals that Allied Management still receives weekly proceeds from all of the Internet Casinos that were "sold," including former Affiliates 67 and 74. As noted above, Allied Management is 100% owned by Allied Veterans, and Duncan and Bass still control the flow of illicit gambling proceeds of the organization. 57 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 69 of 130 79. To further investigate whether the Internet Casinos had been "sold," undercover visits were conducted on August 20,2012 and August 31,2012. As part of those visits, investigators went to all of the locations identified in paragraph 5 above, including former "Affiliates" 67 and 74. The following is a summary of those undercover visits: o All of the listed "Affiliate" internet casino locations had removed signage and advertisement indicating their affiliation with Allied Veterans except for former "Affiliates" 39 (located in Duval County), 61 (located in Flagler County), and 32 (located in Volusia County). o When the undercover investigator entered each location. the cashier/employee asked if the undercover investigator had ever been to the location before to determine if the customer/investigator had a previous account established. The investigator responded each time to the effect: "yes, but when the business was Allied Veterans of the World." The investigator then asked the cashier/employee if the business had been sold. In response, all the locations (except for two (2) locations in Leon County. Florida). stated "No", and responded to the effect that "we just changed our name but did not sell the business." Many of the employees at the locations stated they still had the same owner and that the business still gives money to the same Allied Veterans charities. At the former "Affiliate" 67 location in Seminole County, the cashier/employee stated: "no, we did not sell the business, we just changed the name because we went from a non-profit business to a for-profit business." o If the investigator had not been to the location before, the cashier/employee would have the agent fill out a customer agreement form stating the investigator was not gambling. This is the same form received on the previous visits, except the Allied Veterans header and logo were missing. o The computer screens had "International Internet Technology" on the bottom of the screen saver as it appeared at the "Affiliate" locations in the January 2012 inspections. The screen saver was the same as it was in January 2012. The two (2) disclaimer screens are the same as the ones that were observed in January 2012, except that the disclaimer screens display the name of Florida Game Promotions (which is a corporation owned by Chase Burns who is discussed later in this affidavit) instead of Allied Veterans. 58 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 70 of 130 o Any alleged "internet time" that had been purchased by an investigator in January 2012 was still on the investigator's account. o All of the games were the same as the games provided by the "Affiliates" in January 2012, and each ofthem operated in the same manner as described in the January 2012 undercover inspections conducted by Sertell. o There was one change in the game play. All but two locations now have a "secondary" drawing called, "Second Chance Drawing". The "Second Chance Drawing" operates in the following manner: When a customer provides a wager/bet/reveal of a certain amount of credits, the computer automatically withdrawals two (2) credits from the customer's account and adds it to the wager/bet/reveal. Those two (2) credits allegedly go into a secondary drawing. Each Internet Casino that offers the "Second Chance Drawing" has large monitors that display a spinning wheel similar to the spinning wheel on the "Wheel of Fortune" game show. When enough credits have been deducted from all the customer's accounts at the particular Internet Casino, the wheel spins and stops on a $30, $50, or $100 cash prize. The monitors then display a wheel similar to that of the "Price is Right" game show wheel. The wheel then spins and stops on a terminal number that is actively being played by a customer. The customer whose terminal is selected wins the cash prize displayed on the monitor. A customer does not have the option of not entering into the secondary drawing. The computer automatically deducts two (2) credits with every wager/bet/reveal the customer places. 80. In Leon County, Florida, an ordinance was passed in 2011 that prohibited the opening of any additional Internet Casinos. After the alleged "sale" of the Internet Casinos in April 2012, the "Affiliates" in Leon County, Florida changed their names to Business Center Unlimited and Capital City Internet. Because of the ordinance, the "new owners" were told that they could not operate and would have to shut down, because they were not the original owners. In response, both of the Leon County, Florida locations continue to operate as "Affiliates" of Allied Veterans. 59 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 71 of 130 81. To further investigate whether the Internet Casinos had been "sold," a corporation inquiry was conducted on all the "Affiliate" locations. According to the online database for the Florida Department of State, Division of Corporations, paperwork was filed with the State of Florida to establish corporations to provide new names for the "sold" Internet Casinos. In almost every case, the alleged new owner or owners of the Internet Casino were the same people or companies who had operated them prior to the alleged "sale." The list below identifies the for-profit corporations that operated, and continue to operate, the Internet Casinos. The alleged sale of the Affiliate locations did not change how the casinos were operated or who operated them. AVOTVV Affiliate 31 AVOTVV Affiliate 32 AVOTVV Affiliate 34 AVOTVV Affiliate 35 AVOTVV Affiliate 36 AVOTVV Affiliate 37 Grant Park LLC Tony Parker, Cary Hardee, Grant Park, LLC Tony Parker, Cary Hardee INH Management Bennie Prince, Shaheen Mosavi, Peggy Prince, Cynthia Weaver Reo's Internet Center CCS Management Group, Inc. Brandon Weaver, Peggy Prince, Lori Barnett Seaside Internet Brad Skidmore, Jann Ryles, Mike Ryles, Elite Internet Center #34 Seaside Internet, LLC Brad Skidmore, Jann Ryles, Mike Ryles, Coastal Games Tony J Parker, Leonard 0 Lucas, Cary G Hardee, The Cove Business Center Coastal Games, LLC ony J Parker, Leonard 0 Lucas, Cary G Hardee, Coastal Games Tony Leonard 0 Lucas, Cary G Hardee The Cove Business Center Coastal Games, LLC Tony Leonard 0 Lucas, Cary G Hardee Bearcon Management Conrad Rowe, Mazen Salloum, Shannon Gahagan Bearcon Management Conrad Rowe, Mazen Salloum, Shannon Gahagan 60 Elite #37 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 72 of 130 AVOTW Affiliate 38 M&S Management Services Mazen Salloum, Salim Saloum Elite #38 M&S Management Services Mazen Salloum, Salim Saloum AVOTW Affiliate 39 MSG Business Centers Gary Davis, Sammy Keeble, Michael Davis Hotspot Internet Center #39 AVMG Incorporated Michael Davis, Gary Davis AVOTW Affiliate 40 MSG Business Centers Gary Davis, Sammy Keeble, Michael Davis Hotspot Internet Center #40 AVMG Incorporated Michael Davis, Gary Davis AVOTW Affiliate 41 Game Advice Cynthia Weaver, Aamir Waheed Allied Intemet Center Game Advice, Inc. Cynthia Weaver, AamirWaheed AVOTW Affiliate 42 Live Oak Internet Services Michael Graham, Joseph Harrington Live Oak Internet Services Live Oak Internet Services Michael Graham, Joseph Harrington Seaside Internet Brad Skidmore, Jann Ryles, Mike Ryles Elite Internet Center #43 Seaside Internet, LLC Brad Skidmore, Jann Ryles, Mike Ryles Conrad Rowe, Mazen Salloum AVOTW Affiliate 43 AVOTW Affiliate 44 B&M Leasing & Management Conrad Rowe, Mazen Salloum Elite Internet Center #44 B&M Leasing & Management, LLC AVOTW Affiliate 45 Ginlin Anthony Alascia Ginlin LLC 45 Ginlin, LLC Anthony Alascia AVOTW Affiliate 46 Davis Internet Management I Jacksonville FOP Foundation Michael Davis, Jon Shave, Gary Davis Hotspot Internet Center #46 A Davis Internet Management Co. Michael Davis, Jon Shave, Gary Davis AVOTW Affiliate 50 Blue Waters Technologies Tony Parker, Cary Hardee The Reef Internet Cafe Blue Waters Technologies, LLC Tony Parker, Cary Hardee AVOTW Affiliate 51 Intelitek Aamir Waheed, Cheri S Black Allied Internet Center Intelitek, Inc. Aamir Waheed, Cheri S Black AVOTW Affiliate 52 Ginlin Anthony Alascia Ginlin LLC 52 Ginlin, LLC Anthony Alascia AVOTW Affiliate 53 Business Center Unlimited Reginald P Medlin, John P Fannin Business Center Unlimited Business Center Unlimited Reginald P Medlin, John P Fannin AVOTW Affiliate 54 Game Advice Cynthia Weaver, Aamir Waheed Allied Internet Center Game Advice, Inc. Cynthia Weaver, Aamir Waheed 61 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 73 of 130 AVOTW Affiliate 55 B&M Leasing & Management Conrad Rowe, Mazen Salloum Elite Internet Center #55 B&M Leasing & Management, LLC AVOTW Affiliate 56 Lake City Internet Services Michael Graham, Joseph Harrington Lake City Internet Services Lake City Internet Services Michael Graham, Joseph Harrington AVOTW Affiliate 57 Seaside Internet - Marion Brad Skidmore, Mazen Salloum, Michael Ryles Elite Internet Center #57 Seaside Internet ~ Marion, LLC Brad Skidmore, Mazen Salloum. Michael Ryles AVOTW Affiliate 58 Blue Waters Technologies Tony Parker, Cary Hardee The Reef Internet Cafe Blue Waters Technologies, LLC Tony Parker, Cary Hardee AVOTW Affiliate 59 Infovice AamirWaheed, Daniel Black, Tariq Waheed Allied Internet Center Infovice, Inc. Aamir Waheed, Daniel Black, Tariq Waheed AVOTW Affiliate 60 Blue Waters Technologies Tony Parker, Cary Hardee The Reef Internet Cafe Blue Waters Technologies, LLC Tony Parker, Cary Hardee AVOTW Affiliate 61 B.B.S. Management Group Bennie Prince, Brandon Weaver, Cynthia Weaver Hero's Internet Cafe B.B.S. Management Group Inc. Bennie Prince, Brandon Weaver, Cynthia Weaver AVOTW Affiliate 63 Seaside Internet - Marion Brad Skidmore, Mazen Salloum, Michael Ryles Elite Internet Center #63 Seaside Internet ~ Marion, LLC Brad Skidmore, Mazen Salloum. Michael Ryles AVOTW Affiliate 65 Horry T echonologies Tony Parker, Cary Hardee The Wave Business Center Horry Technologies Tony Parker, Cary Hardee Digitrac Aamir Waheed, Richard Rubino, Tariq Waheed. Daniel Black Allied Internet Center Digitrac, Inc. Aamir Waheed, Richard Rubino, Tariq Waheed, Daniel Black AVOTW Affiliate 68 Seaside Internet Brad Skidmore, Jann Ryles, Mike Ryles Elite Internet Center #68 Seaside Internet, LLC Brad Skidmore, Jann Ryles, Mike Ryles AVOTW Affiliate 70 JAC Sweeps Anthony Alascia JAC Sweeps LLC70 JAC Sweeps Anthony Alascia AVOTW Affiliate 71 Free Entry Clay County Mazen Salloum. Brad Skidmore. Mike Ryles Elite Internet Center #71 Free Entry Clay County, LLC Mazen Salloum, Brad Skidmore. Mike Ryles AVOTW Affiliate 67 62 Conrad Rowe, Mazen Salloum Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 74 of 130 Gainesville Internet Services Michael Graham, Joseph Harrington Gainesville Internet Services Michael Graham, Joseph Harrington AVOTW Affiliate 74 Digitrac AamirWaheed, Richard Rubino, Tariq Waheed, Daniel Black Allied Internet Center Digitrac, Inc. Aamir Waheed, Richard Rubino, Tariq Waheed, Daniel Black AVOTW Affiliate 76 MegJon Anthony Alascia Megjon LLC MegJon LLC Anthony Alascia AVOTW Affiliate 77 Digitrac Aamir Waheed, Richard Rubino, Tariq Waheed, Daniel Black Allied Internet Center Digitrac, Inc. Aamir Waheed, Richard Rubino, Tariq Waheed, Daniel Black AVOTW Affiliate 78 Media Advice Cynthia Weaver, Aamir Waheed Allied Internet Center Media Advice Cynthia Weaver, Aamir Waheed AVOTW Affiliate 79 Capital City Internet Center Reginald P Medlin, John P Fannin Capital City Internet Center Capital City Internet Center Reginald P Medlin, John P Fannin AVOTW Affiliate 81 Seaside Internet - Putnam Brad Skidmore, Mazen Salloum Elite Internet Center #81 Seaside Internet Putnam, LLC Brad Skidmore, Mazen Salloum AVOTW Affiliate 85 Gulf Internet Services Michael Graham, Joseph Harrington Gulf Internet Services Gulf Internet Services Michael Graham, Joseph Harrington AVOTW Affiliate 86 Infohub Aamir Waheed, Nirav Patel Allied Internet Center Infohub, Inc. Aamir Waheed, Nirav Patel AVOTW Affiliate 91 Seaside Internet - Marion Brad Skidmore, Mazen Salloum, Michael Ryles Elite Internet Center Seaside Internet - Marion, LLC Brad Skidmore, Mazen Salloum, Michael Ryles AVOTW Affiliate 75 Blue Waters Internet Technology, LLC Palms Business Center Blue Waters Internet Technology, LLC Affiliate 46B Davis Internet Management Company, LLC Michael Davis Hot Spot B Davis Internet Management Company Michael Davis, Jon Shave, Gary Davis AVOTW Affiliate 66/84 Gulf Internet Services, LLC Michael Graham, Joseph Harrington Gulf Internet Services Gulf Internet Services, LLC Michael Graham, Joseph Harrington, AVOTW Affiliate 72 Tony Parker, Michael Ryles, Brad Skidmore, Mazen Salloum Gainesville Internet Services Tony Parker, Michael Ryles, Brad Skidmore, Mazen Salloum o 63 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 75 of 130 Michael Graham, Joseph Harrington Gulf Internet Services Gulf Internet Services, LLC Michael Graham, Joseph Harrington, New Location J&R Business Center J&R Business Center, Inc. Reginald Medlin, John Fannin New Location Quincy Business Center Quincy Business Center, Inc. Reginald Medlin, John Fannin AVOTW Affiliate 89 82. Gulf Internet Services, LLC In sum, based on the undercover inspections conducted in August 2012 (including conversations with employees at the Internet Casinos), a review of the financial records of Allied Management, a review of corporate records, and the other evidence summarized in this Master Affidavit, I believe that the Internet Casinos are operating in substantially the same manner as they did prior to the alleged "sale." Given that the alleged new owner of the Internet Casino is, in almost every case, the same individual or group of individuals who operated the Internet Casinos prior to the alleged "sale," I believe that the claim that the Internet Casinos were "sold" by Allied Veterans is false and is another part of the conspiracy and scheme to conceal from the public, governmental agencies, and the courts the true nature of the operation of the Internet Casinos identified in paragraph 5 above. The Internet Casinos Are Not Authorized Sweepstakes or Game Promotions 83. In response to the claim that the games offered at the Internet Casinos are gambling in violation of Florida law, Allied Veterans and others involved in the operation of the Internet Casinos have claimed that they are conducting a game promotion pursuant to Florida Statute ? 849.094, which provides in part: 64 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 76 of 130 (1) As used in this section, the term: (a) (b) (2) "Game promotion" means, but is not limited to, a contest, game of chance, or gift enterprise, conducted within or throughout the state and other states in connection with the sale of consumer products or services, and in which the elements of chance and prize are present. However, "game promotion" shall not be construed to apply to bingo games conducted pursuant to s. 849.0931. "Operator" means any person, firm, corporation, or association or agent or employee thereof who promotes, operates, or conducts a game promotion, except any charitable nonprofit organization. It is unlawful for any operator: (a) To design, engage in, promote, or conduct such a game promotion, in connection with the promotion or sale of consumer products or services, wherein the winner may be predetermined or the game may be manipulated or rigged so as to: 1. Allocate a winning game or any portion thereof to certain lessees, agents, or franchises; or 2. Allocate a winning game or part thereof to a particular period of the game promotion or to a particular geographic area; (b) (c) To fail to award prizes offered; (d) To print, publish, or circulate literature or advertising material used in connection with such game promotions which is false, deceptive, or misleading; or (e) (3) Arbitrarily to remove, disqualify, disallow, or reject any entry; To require an entry fee, payment, or proof of purchase as a condition of entering a game promotion. The operator of a game promotion in which the total announced value of the prizes offered is greater than $5,000 shall file with the Department of Agriculture and Consumer Services a copy of the 65 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 77 of 130 rules and regulations of the game promotion and a list of all prizes and prize categories offered at least 7 days before the commencement of the game promotion. Such rules and regulations may not thereafter be changed, modified, or altered. The operator of a game promotion shall conspicuously post the rules and regulations of such game promotion in each and every retail outlet or place where such game promotion may be played or participated in by the public and shall also publish the rules and regulations in all advertising copy used in connection therewith. However, such advertising copy need only include the material terms of the rules and regulations if the advertising copy includes a website address, a toll-free telephone number, or a mailing address where the full rules and regulations may be viewed, heard, or obtained for the full duration of the game promotion. Such disclosures must be legible. Radio and television announcements may indicate that the rules and regulations are available at retail outlets or from the operator of the promotion. A nonrefundable filing fee of $100 shall accompany each filing and shall be used to pay the costs incurred in administering and enforcing the provisions of this section. *** (5) Every operator of a game promotion in which the total announced value of the prizes offered is greater than $5,000 shall provide the Department of Agriculture and Consumer Services with a certified list of the names and addresses of all persons, whether from this state or from another state, who have won prizes which have a value of more than $25, the value of such prizes, and the dates when the prizes were won within 60 days after such winners have been finally determined. The operator shall provide a copy of the list of winners, without charge, to any person who requests it. In lieu of the foregoing, the operator of a game promotion may, at his or her option, publish the same information about the winners in a Florida newspaper of general circulation within 60 days after such winners have been determined and shall provide to the Department of Agriculture and Consumer Services a certified copy of the publication containing the information about the winners. The operator of a game promotion is not required to notify a winner by mail or by telephone when the winner is already in possession of a game card from which the winner can determine that he or she has 66 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 78 of 130 won a designated prize. All winning entries shall be held by the operator for a period of 90 days after the close or completion of the game. *** (9)(a) Any person, firm, or corporation, or association or agent or employee thereof, who engages in any acts or practices stated in this section to be unlawful, or who violates any of the rules and regulations made pursuant to this section, is guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083. *** (10) This section does not apply to actions or transactions regulated by the Department of Business and Professional Regulation or to the activities of nonprofit organizations or to any other organization engaged in any enterprise other than the sale of consumer products or services. Subsections (3), (4), (5), (6), and (7) and paragraph (8)(a) and any of the rules made pursuant thereto do not apply to television or radio broadcasting companies licensed by the Federal Communications Commission. 84. One of the key requirements of a "game promotion" is that no purchase must be necessary to play the game. In an effort to deceive the public, governmental entities, and courts that they are offering a game promotion as opposed to a slot machine, Allied Veterans and others involved in the operation of the Internet Casinos identified in paragraph 81 above have represented that any individual can receive 100 free entries that will make them eligible to win the same prizes as someone who makes a purchase. In explaining how this is possible, Allied Veterans and others involved in the operation of the Internet Casinos have represented that the games are drawings of chance from a finite pool of entries and that each customer is predetermined in the amount they will win at each game. As proof that it does not matter how a customer 67 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 79 of 130 chooses to playa game (including decisions of which game to play or how much to wager), Allied Veterans and others involved in the operation of the Internet Casinos have claimed that a customer does not need to play the game, but can get the results from a "quick reveal" feature where an employee can immediately advise a customer how much they have won or lost. The following are some of the statements that have been made in support of these claims: Source of Re~resentation Quotation from Source Complaint 'from Allied Veterans of the World, Inc, Affiliate 47 v. County of Pinellas 'All entries distributed upon request were drawn from the same finite pool of entries and thus had the same chances of winning a prize as those entries distributed in connection with the purchase of internet access time." Alliedvets.org Internet site on a page called "Affiliates" "[S]upporters of Allied Veterans of the World can visit an affiliate location and receive a free identification card. The card allows individuals to enter our sweepstakes for a chance to win $5,000. Upon registration, 100 free entries are given to the individual each day and an additional 100 free entries are given for every five minutes on Internet time they purchase." "[T]he sweepstakes entries assigned to the customer's account were drawn from a set, or finite, pool of entries. That pool of entries contained a precise number of entries that were not winners, a precise number of entries that won the first prize, a precise number of entries that won second prize, etc. In other words, the pool of entries and the result of each individual entry were pre-defined". Complaint from Allied Veterans of the World Inc., Affiliate 66 v. City of Longwood Affidavit of Bass in Allied Veterans of the World Inc., Affiliate 66 v. City of Longwood, in the Eighteen Judicial Circuit in and for Seminole County Florida "All entries distributed without purchase were drawn from an identical finite pool of entries and thus had the same chances of winning a prize as those entries distributed in connection with the purchase of internet time access." 'All entries distributed without purchase were drawn from an identical finite pool of entries and thus had the same chances of winning a prize as those entries distributed in connection with the purchase of internet time access." 68 --------- Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 80 of 130 Motion for Return of Property in Allied Veterans of the World Inc' l Affiliate 66 v. Cit~ of Longwood, in the Eighteen Judicial Circuit in and for Seminole County Florida 85. 'The entries provided without purchase of internet access ime had the same chance of winning as the entries provided in connection the sale of internet access time and he sweepstakes entries were drawn from a randomly shuffled finite pool of entries, and finally the method or number of entries revealed at one time did not affect the results of the sweepstakes entries." In addition, Allied Veterans has used Nick Farley, President of Nick Farley & Associates, to testify in both state and federal court about the legality of the games. As part of his work for Allied Veterans, Farley has stated that he has examined the liT software. One case where Farley testified was a federal criminal case in the Eastern District of Texas (United States v. Phillip Dell Clark et aI., Case No.1 :09CR114) where the three defendants who went to trial were convicted. During his testimony on July 6, 2010, Farley compared the liT software to pulling an entry from a fishbowl: But if you looked at it like lottery scratch off tickets, okay, where they're shuffled when they're printed and assembled and then when you go to a convenience and buy a scratch off lottery ticket, the retailer just pulls the next one and tears it off. The sweepstakes pool is constructed much like that. It's randomized before it gets delivered. And when a sweepstakes entry is requested, it's just the next one in order that's given to you. Farley was also asked if a customer who had to leave could find out from the cashier whether he or she had won. Farley responded: Absolutely. At the point of sale, the cashier can swipe your card and do what they call an instant reveal. Which just takes your sweepstakes entries and totals them up to the total amount of prizes that were associated with each of the entries that you had. 86. Each Internet Casino identified in paragraph 81 above has a set of rules that are posted. The rules used to be titled under "Allied Veterans," but they are now 69 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 81 of 130 titled under the name of "Florida Game Promotions." Investigators have found two different sets of rules. In the first paragraph of both sets of the rules, the first paragraph states: "No entry-fee or payment is necessary to enter or win the Sweepstakes." In one set of rules, paragraph 3 states in part, "Each level for each themed revealer is a separate sweepstakes. Each sweepstakes consists of a finite number of entries generated and shuffled before the sweepstakes begin." Other sets of rules do not include those statements. 87. In the lawsuit that was filed against Seminole County in the Middle District of Florida, the Complaint for Injunctive and Declaratory Relief, which was verified by Bass, summarized the position of Allied Veterans regarding how the games work: 23. Allied Veterans' sweepstakes entries are drawn from a set, or finite, pool of entries containing a precise number of winners, non-winner, first prizes, second prizes, etc. In other words, the pool of entries is pre-defined. *** 26. All entries distributed without purchase are drawn from the same finite pool of entries and thus have the same chances of winning a prize as those entries distributed in connection with the purchase of internet access time. *** 29. While many companies' promotions use paper entries revealed through scratch-offs or pull-tabs, Allied Veterans uses video display to reveal the results. "Quick reveal" simply displays by alphanumeric text the results of each entry without fanfare. "Game display" uses games including, along with alphanumeric text, graphic icons and animations, some of which include simulations of casino games. The video display uses interactive artwork, storylines, symbols, and text to create the emotions of excitement and suspense within the customer and to communicate the results of the entry. The customers may interact with the games but cannot affect the results of the entries. The customer terminals display the 70 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 82 of 130 results of the entries but no determine or affect the results in any way. 30. 88. When revealing results, Allied Veterans' computers electronically draw the requested number of entries from the finite pool of available entries. The computer terminal then reveals the results of the entries in the manner chosen by the customer. The manner of entry distribution from the finite pool remains the same regardless of how (quick reveal or game display) the customer reveals his or her results. Accordingly, how the entries are revealed plays no role in the results achieved. Once an entry is drawn, it is removed from the pool and is no longer available to subsequent participants. In other words, one consistent set of representations has been that the result of the game is predetermined and that there is nothing that a customer can do to affect the odds of winning or the amount of their prize. That is not true. How a customer chooses to play the games does matter, and only paying customers are eligible for the larger cash prizes. 89. Investigators have received transcripts from a case of the Office of the Attorney General in South Carolina, which has had extensive dealings in investigating the games offered by liT in that state. One of the individuals who has provided testimony in connection with some of the proceedings in South Carolina regarding the legality of Internet Casinos is Farley (discussed above). In his testimony in South Carolina, Farley has stated that there is not one pool from which a customer receives a random entry. Instead, there are several different pools based on which game is selected by the customer. Each pool has different prizes and different odds of winning, and the grand prize for every pool requires more entries than the number of free entries that are provided to non-paying individuals. If a customer chooses the "quick reveal" 71 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 83 of 130 option, then the customer is in a different pool than if the customer decided to play the games at the computer. 90. The situation is the same in the Florida locations of the Internet Casinos. Every game has various levels of entry depending upon the amount the customer wagers. If a customer plays with 25 entries, the most the customer can win is $500. If the customer plays with 650 entries, the customer can win the grand prize of $13,000. A customer who only receives the 100 free entries is limited in the prizes that they can win (up to $2,000) and is ineligible for the grand prize, which means that a purchase is necessary to enter the game and win the grand prizes. 91. It also matters how a customer at an Internet Casino in Florida chooses to play the game. In August 2011, Allied Veterans submitted various documents to obtain a Simulated Gambling Facility Permit in Leon County, Florida to open "Affiliate" 53. One of the documents that was submitted was an April 11, 2011 report written by Farley. The report was entitled, "Review and Analysis of the liT Sweepstakes Promotion system with Game Server version 2.4.0.0 developed by International Internet Technologies, LLC." On page 5 of this report under Section III?Pools of Sweepstakes, Farley states: All sweepstakes entries revealed by the participant on the International Internet Technology, LLC liT Sweepstakes Promotion systems originate from separate finite pools of 2,000,000 sweepstakes entries for each of the Poker theme, 5?reeI25?line reel-spinning themes, and Instant Reveal themes; and 1,000,000 sweepstakes entries for the Keno themes. The finite pool from which an entry is selected is chosen based upon the amount of Sweepstakes e's used to reveal one entry and the games theme used as an entertaining display. 72 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 84 of 130 Farley further acknowledges in his report that there are 151 sweepstakes entry pools. which cover four different game types. These are 45 Universal pools for the 5-Reel. 25 Line and Instant Reveal game themes as well as the Entry Revealer feature (5 pools at each of the 9 play levels). 100 pools for the Poker Themes (5 pools at each of the 20 play levels), 6 pools for the Keno Themes (1 pool at each of the 6 play levels). 92. Farley's report acknowledges that there are multiple prize pools, that there are different odds for winning different amounts depending on the amount of entries, that the instant reveal feature is a separate set of pools (different from the games), and in order to win the grand prize you must purchase additional entries. I believe that each of these aspects of the games means that they cannot constitute game promotions Linder Florida law. 93. The games offered by the Internet Casinos also cannot constitute game promotions under Florida law because of the "Second Chance Drawing" that is now offered. A customer's odds of winning that drawing are dependent on factors peculiar to the location where they are, such as number of others who are playing and the number of entries that are taken from a customer and allocated to the drawing. 94. The Internet Casinos identified in paragraph 81 fail to comply with several other aspects of the game promotion statute. Based on investigation conducted to date, the following are some of those: a. The Agriculture Department has advised that no application for a game promotion is on file for Allied Veterans, Allied Management. any of the "Affiliates," or any of the for-profit corporations identified in paragraph 81 above. 73 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 85 of 130 b. The game promotion statute requires that an operator of the game promotion file a copy of the rules and regulations of a game promotion, establish a trust account when more than $5,000 in prizes will be awarded, and report each winner of more than $25. An investigator has contacted the Agriculture Department and has been advised that the Agriculture Department has no such submissions in its files for Allied Veterans, Allied Management, any of the "Affiliates," or any of the for-profit corporation identified in paragraph 81 above. c. The Internet Casinos identified in paragraph 81 above circulate deceptive literature or advertising regarding the operation of the Internet Casinos. The literature provided to customers represents that a clJstomer does not need to make a purchase to enter or win the "sweepstakes" and that a purchase will not increase a customer's change of winning. As noted above, however, those representations are contrary to those that were made to customers about only being able to win the top prize if a customer bets the maximum number of entries for that game (which is above the 100 free entries that are given to individuals who provide identification). Those representations are also inconsistent with the "Rules" that were seized by the Pinellas County Sheriff's Office in May 2008, which provided, in part, that the "odds of winning" for a customer "[m]ay vary depending on the number of entries." d. The sale of internet time is not a consumer product, but is a sham designed to circumvent the Florida Statutes. I have been advised that, as part of each undercover visit to the Internet Casinos, undercover agents counted the persons in each location who were actually browsing the internet. For all of the Internet Casinos, undercover agents never saw more than three customers on the internet at any location 74 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 86 of 130 (× they did not see single customer on the internet). The amount of customers in each location ranged from twenty to fifty customers. In one location, some of the computers did not have keyboards unless the customer requested one. Chase Burns and liT 95. liT is a corporation organized under the laws of Oklahoma. Chase Burns is the President of liT. liT licenses a promotional sweepstakes software system to various Internet Casinos around the country, including those in Florida that used the Allied Veterans name and those identified in paragraph 5 above. 96. Each of the Internet Centers identified in paragraph 81 above communicates, by use of interstate wire, with the liT facility located in Oklahoma. Based on investigation conducted to date, there is probable cause to believe that there is a server located at the liT facility in Oklahoma that transmits information by interstate wire to the Internet Centers located in Florida to allow the games to be played at the Florida locations. The following is a summary of some of the evidence that has been collected to date about liT and its role in the operation of the Internet Casinos identified in paragraph 81. 97. In response to seizures by the Seminole County Sheriff's Office and the Longwood Police Department in 2009 of some of the slot machines and other items from the Internet Casinos that used the Allied Veterans name in Seminole County, Florida, Burns submitted an affidavit in which he stated that liT was the owner of the computer server that was seized. According to Burns, the liT computer server "contained custom software which tracked customer accounts and related data and provided for internet access based on prepurchased minutes." Burns further stated: 75 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 87 of 130 In addition to the internet access custom software and the custom sweepstakes software contained on the server it also contained the customer account database. The customer account database contained information relating to the identification and address of the customer, the amount of internet access available to that customer and the number of sweepstakes entries that the customer had. It also contains information regarding prizes that had been won by customers but not yet collected. 98. An employee of liT testified on June 19, 2008 in connection with a forfeiture action that was brought in Pinellas County after the Sheriff's Office in that County executed a search warrant at Affiliate 47. The liT employee who testified was Troy Talent. Talent works out of ITT's headquarters in Oklahoma. A summary of a portion of Talent's testimony is as follows: a. Talent was employed by liT. According to Talent, liT provides software for Allied Veterans to include "Internet cafe' software and sweepstakes revealing software". Talent is a technician for liT and does maintenance, setup, and overall oversight of Allied Veterans facilities for liT. b. PITX was the "oversight management company" for Affiliate 47, which Talent explained was an "Allied Veterans fundraising facility." liT provides the software and the sweepstakes software and the technological software for accessing the internet to all of the locations in Florida that use the Allied Veterans name. All of those locations operate in the same manner. c. The "sweepstakes" works off of a "finite" cartridge and when all the entries have been used, another "finite" cartridge is activated. d. Talent stated that each Internet Casino that uses the Allied Veterans name has a separate and independent finite pool. According to Talent, "[t]he 76 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 88 of 130 main server contains the database which holds the customer's accounts and the finitethe cartridge which supplies the internet terminals with their entries". 99. In an affidavit, dated January 25, 2012, submitted by Bass in the lawsuit that was brought against Seminole County in the Middle District of Florida, Bass stated as follows regarding the software that is used in the operation of the Internet Casinos: Likewise, Allied Veterans uses confidential, proprietary software applications for its computers. This proprietary software is used both for the internet and sweepstakes applications, is contained on the computers in the Allied Veterans stores, and is licensed for a fee to Allied Veterans through a software licensing agreement containing strict provisions of confidentiality. Allied Veterans is not permitted to disseminate or disclose any software information provided to it by the software provider, International Internet Technologies ("IIT"), and Allied Veterans' written confidentiality agreement requires its contractors and their employees to keep the computer software information confidential. To that end, Allied Veterans' contractors and their employees are not permitted to investigate the software code or otherwise reverse engineer the computer system in order to determine the software code. All computer maintenance involving the operation of this proprietary software is done exclusively by the employees of liT; neither Allied Veterans nor its contractors may access or perform work upon the programming software. In order to prevent piracy of the software, Allied Veterans does not permit anyone to photograph the screens of the computers, and Allied Veterans has arranged the customer computers so that they do not permit the insertion of any device which would enable the customer to store, download, remove or copy any of the proprietary software contained on the customer or point of sale computers. Allied Veterans affiliates are the exclusive users of liT's software within the State of Florida. Any unauthorized replication or duplication and use of this software will inevitably result in a loss of competitive advantage. 100. In his January 25,2012 affidavit, Bass provided the following information regarding the training of the employees of the Internet Casinos: Allied Veterans uses corporate training books to educate its contractors and their employees on procedure and policy relating to the operation of the business. There are two notebooks that are used for educational and training purposes, one is the contractor notebook, which is strictly confidential and not distributed or show to employees or customers. The other is an affiliate notebook and is used to educate and train employees 77 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 89 of 130 regarding policy and procedure and is not shown to customers. Pursuant to Allied Veterans' confidentiality rules, the employees are not allowed to copy or remove the affiliate notebook from the store premises, and the contactor notebook is not for distribution to employees at all. Unauthorized dissemination of the information in the notebooks by a contractor or employee is prohibited and considered a violation of the written confidentiality agreements. 101. Burns and liT are involved in the training of the employees of the Internet Casinos through dissemination of the liT operational procedures manual. A copy of that manual was seized from an Internet Casino during execution of search warrants in Virginia (the location used liT, but was not a location that used the Allied Veterans name). The following is a summary of portions of that manual: a. In the "Business Center Description for Employees," liT warns operators: Employees will not regard the business as a gambling establishment. The words gambling, casino, bet, payout, cash out or anything similar will not be used in the work place. Non-compliance to this could result in immediate termination of employee and/or the liT Licensing Agreement. b. Each employee is required to sign a certification that provides as follows: ANY LOCATION THAT DOES NOT FOLLOW THE INSTRUCTION SHEET AND MIS-REPRESENTS THEMSELVES, THE LOCATION, OR SOFTWARE WHEN ANSWERING QUESTIONS PERTAINING TO THE SWEEPSTAKES, WILL VOID THEIR RIGHT TO LEGAL REPRESENTATION, AND THE LOCATION WILL BE PERMANENTLY CLOSED. I HAVE READ AND FULLY UNDERSTAND THE EMPLOYEE INSTRUCTION SHEET. I ALSO UNDERSTAND THAT I WILL FORFFEIT ANY LEGAL REPRESENTATION IF I DO NOT ADHERE TO THE EMPLOYEE INSTRUCTION SHEET. 78 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 90 of 130 c. The manual provides the operator and employees with a list of twelve (12) procedures, including the following (emphasis is in original): 1. Your business center is not allowed to limit the amount of internet time that has to be purchased by a customer. Example: You can not tell them a purchase has to be more than $5. Redemptions for sweepstakes winnings also can not be limited. 2. Your business center can not have a Pot of Gold sweepstakes free spin or any other type of sweepstakes in it. liT cannot share entrances, exits, or common areas with other business centers or products selling phone time or electronic sweepstakes. 3. Your employees must be trained and know that they are not working in a gambling establishment. 4. Your location is not like a casino or internet gambling. They are not betting. 5. No Raffles or Drawings allowed of any kind. *** 8. Personnel are not allowed to talk or comment to media at anytime. *** 10. d. Location's are not allowed to post photos, receipts, and posters or advertise in any publication of previous or current winners. The manual warns the operator and employees that "liT has been advised by legal counsel that any of the above could jeopardize liT software's legality." e. The manual provides a schedule of "fines" for "offenses," with $1,000 for the "first offense," $5,000 for the "second offense," and $10,000 and possible closure for the "third offense." 79 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 91 of 130 102. liT receives approximately 25% of the net proceeds of each Internet Casino (Net Proceeds shall be Gross Proceeds less the Ten Percent (10%) that is retained by Allied Veterans) in Florida that uses the Allied Veterans name. Between 2007 and January 5, 2012, liT received over $63 million from the operation of the Internet Casinos in Florida that use the Allied Veterans name. Even after the alleged "sale," a review of financial records confirms that liT still receives a portion of the proceeds of the gambling operation every week. 103. In addition to receiving those proceeds and directing the operations of liT, Burns was the owner of two Internet Casinos that operated in Florida. Burns used two companies. a. One was PITX Internet LLC (PITX), which was a Florida limited liability company that was formed on April 6, 2007. Burns was listed as the managing member of PITX. Burns listed his address on the registration form as 111 N.W. 2nd Street, #134, Anadarko, OK 73005. PITX operated Affiliate 47, which was located in Pinellas County, Florida, and (in 2008 and part of 2009) Affiliate 31, which was located in Lake County, Florida. PITX's address was listed as 1050 US Hwy 27, Clermont, FL 34714. PITX was administratively dissolved by the State of Florida in September 2010. b. The other was Teamwork Management LLC (Teamwork Management), which was a Florida limited liability company that was incorporated on March 26,2009. Burns was listed as the managing member of Teamwork Management. Burns listed his address on the registration form as P.O. Box 130, Anadarko, OK 73005. Teamwork Management operated Affiliate 31 at 1050 US Hwy 27, Clermont, FL 34714. 80 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 92 of 130 Teamwork Management was dissolved in January 2010 according to the records for the State of Florida. c. From a review of financial records of Affiliates 31 and 47, investigators have determined that Burns' two companies received approximately 66% of the proceeds of those Internet Casinos, in addition to the approximately 25% received by liT. 104. The Pinellas County Internet Casino operated by Burns was the subject of a search warrant that was executed by the Pinellas County Sheriffs Office on May 28, 2009. I have been advised by another investigator that approximately $8,900 in currency and sixty-two (62) slot machines, among other things, were seized in that search. In addition to the execution of that search warrant, the manager of that Internet Casino, James Michael Hill, was arrested for violations of Florida Statute ? 849.15, among other charges. The following is a summary of some of the information regarding that search warrant, prosecution, and related forfeiture matter: a. At the time of his arrest, Hill was working for Burns through PITX. liT provided the software that was used for the slot machines that were seized. b. After the execution of the search warrant, Mathis, as the attorney for Affiliate 47, filed a Complaint for Declaratory and Injunctive Relief. In this lawsuit, Mathis represented that Allied Veterans of the World Inc, Affiliate 47 was a non-profit corporation that was exempt from Federal taxation pursuant to Section 501(c)(19). Mathis also asserted that the operations of the Internet Casino were permissible pursuant to Florida Statute ?? 849.0935 and 849.094, because, according to Mathis, "Florida law clearly permits game promotions in connection with the sale of consumer 81 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 93 of 130 services and for tax exempt organizations to conduct fundraising via drawings by chance so long as there is no purchase, donation, or contribution necessary to participate by receiving a chance to win." Mathis further stated that the operator of Affiliate 47 was not required to submit an application with the Agriculture Department, obtain a bond, or set up a trust account, because those requirements of the game promotion statute are "inapplicable to non-profit organizations." c. During the time of his arrest, Hill resided in Davenport, Florida. A review of bank records of Teamwork Management revealed that Teamwork Management paid the rent for Hill while he worked as a manager of Burns' Internet Casino. A check payable to Orlando Vacation Realty dated August 31, 2009 written from Teamwork Management for $1,200 was for the rental of that address, and additional checks were written every month for $1,200 to pay the rental at that address and to pay Progress Energy for the power at that address. The last check for payment of rent was signed by Burns and was dated January 6, 2010, with the notation on the check indicating that it was for rent for March and April. d. On August 20,2009, Hill entered a nolo contendre plea to twelve (12) misdemeanor violations of Florida Statute ? 849.15, received a withhold of adjudication, and was sentenced to probation. e. Affiliate 47 dismissed its Complaint, and the Pinellas County Sheriffs Office filed a motion to destroy evidence pursuant to Florida Statute ?? 849.18 and 849.19, which was not opposed. 105. Burns formed Teamwork Management after Hill was arrested. Burns continued to operate Affiliate 31 using Teamwork Management for part of 2009. 82 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 94 of 130 106. At some point in 2010, Grant Park LLC began operating Affiliate 31. Grant Park LLC was formed in Florida on January 13, 2010 by Anthony Parker and Cary Hardee, who owned other Internet Casinos. A financial analysis was done on Grant Park's bank account, which revealed that Hill continued to receive payments from Grant Park LLC after he was sentenced. The analysis also revealed that Hill received over $500,000 for 2010 and 2011, which is more than Parker and Hardee. 107. After Hill was sentenced, Burns continued to pay some of the operational expenses of some of the Internet Casinos, including the following: a. Allied Veterans required all Internet Casinos that used its name to pay a $2,000 fee every year for administrative fees. On January 6, 2010, Burns wrote a check from an liT bank account for $8,000 to Allied Management. The notation on the check stated "Fees FL Affs 31, 52,45, 70." Affiliate 31 was discussed above. Affiliates 45 and 52 were located in Spring Hill, FL, and Affiliate 70 was located in Sarasota, FL. b. On May 20, 2011, a check was written on the Bank of America account of liT (check # 2090) to Better Games for $80,000.00. The memo line reads "Reimburse location startup cost". Better Games received proceeds from the for-profit companies that operated Affiliates 42,56,72, and 85. c. On December 15, 2011, a check was written on the Bank of America account (check# 2375) of liT to Allied Management for $14,112.50. The memo line reads "Ordance Permits - Jax FI". Duval County, Florida requires a permit fee for any "simulated gambling facility" that operates in that county. There were eight (8) Internet Casinos that used the Allied Veterans name in Duval County, Florida. 83 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 95 of 130 108. As part of the effort to end the participation of the "Affiliates" in the Seminole County lawsuit, Bass filed another affidavit in which he represented that Allied Veterans had received notification of termination effective April 2012 of its exclusive software license with liT for the operation of an electronic sweepstakes in the state of Florida. Based on the inspections that were conducted in August 2012, investigators have determined that the Internet Casinos identified in paragraphs 5 and 81 are still using software from liT. Additional Information on liT's Oklahoma Location 109. Agents conducted surveillance on the liT location at 101 E. Kansas Ave., Anadarko, OK on November 1, 2011 and November 2, 2011. The location is a white building with darkened windows that are barred. During the surveillance on both days, the agents observed Burns and his wife arrive at the building for work each morning. The agents also saw additional employees arrive for work each morning. On November 2, 2011, at about 1:30 p.m., the agents observed a United Parcel Service truck arrived at the location to make a delivery. Agents were able to look inside building as the door was opened. Agents were able to see computer towers, game consoles, and other computer related items in the building. 110. On December 4, 2012, Agents from the Oklahoma State Bureau of Investigation conducted surveillance on the Oklahoma location of liT. The Agents observed new cooling units attached to the back of the building, a keypad attached to the front on the building used to allow employees to enter, video surveillance cameras attached to the building, and numerous vehicles in front of the building. The Agents were able to determine that some of the vehicles at the location belonged to Burns and 84 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 96 of 130 liT and that liT is still operating out of this location. During surveillance on December 7, 2012, Agents observed a vehicle departing the liT location. A check on the tag of the vehicle revealed that the vehicle belonged to Talent (mentioned in paragraph 98 above). Talent is the liT employee who testified in the Pinellas County case in 2008 and is the person who was in contact with the Internet Casinos in Florida that used the Allied Veterans name. Information About Florida liT Location 111. liT, along with one of the subcontractors, Blue Waters Technologies, have opened a location in Port Orange, FL that appears to be used to repair all the slot machines in the area. Special Agent McCabe and other agents conducted surveillance of this location on November 5,2012, November 8,2012, and November 15, 2012. Each morning, employees were observed arriving in vans that are registered to liT and Blue Waters Technologies. Those employees were observed entering the warehouse to begin work. The employees were observed loading and unloading vans with computer equipment, including monitors, CPU's, and keyboards. 112. The location is leased by Blue Waters Technologies LLC. Parker and Hardee, who are the corporate officers of Blue Waters Technologies LLC, have filed the paperwork with the State of Florida to change their corporate address to this location. Parker and Hardee are current owners of various locations discussed in paragraph 81. State Search Warrants 113. The Pinellas County Internet Casino is not the only one that has been the subject of a search warrant. The following is a summary of information about two other search warrants: 85 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 97 of 130 a. On May 25, 2009, the Jackson County Sheriff's Office and FDLE executed search warrants at Affiliate 42 in Jackson County, Florida and seized, among other things, approximately sixty (60) slot machines that used liT supplied software. On August 24,2009, Allied Veterans and the State Attorney's Office for the 14th Judicial Circuit entered into an agreement by which Allied Veterans agreed to not contest the forfeiture proceedings and to not conduct business in the Counties covered by the 14th Judicial Circuit (Jackson, Calhoun, Bay, Gulf, Holmes, and Washington Counties). In the agreement, the State Attorney's Office expressed its opinion that the operation of the Internet Casinos were "unlawful," but that the State Attorney's Office would not pursue any civil or criminal actions against the Internet Casinos or any of its officers, agents, managers, representatives, or employees in exchange for the agreement by Allied Veterans to cease operation in the 14th Judicial Circuit. Allied Veterans expressed its opinion that the Internet Casinos were lawful, and Allied Veterans stated that it was entering into the agreement "to avoid protracted civil and criminal litigation." Allied Veterans stated that it would resume operations should there be a "clarify[icatior1]" in the law, either through the Legislature or the courts. Allied Veterans stated that "[t]his charity will continue to operate and fund raise in manners which are in compliance with State Law." Bass signed the agreement on behalf of Allied Veterans. b. On August 20,2009, the Longwood Police Department and the Seminole County Sheriff's Office executed a search warrant at Affiliate 66 in Seminole County, Florida. In response to the search warrant, on or about February 2010, Mathis, on behalf of Affiliate 66, filed a complaint with the 18th Judicial Circuit in and for Seminole County, Florida against the City of Longwood seeking an injunction prohibiting 86 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 98 of 130 the City from interfering with the gaming center and damages for lost revenues. During the litigation, Burns, as President of liT, submitted the affidavit discussed in paragraph 97 above. In that affidavit, Burns also stated, under oath, that there was no offsite back up for the customer database and that back up was performed internally on redundant hard drives of the server that was taken by law enforcement. On November 12, 2010, Affiliate 66 'filed a Notice of Voluntary Dismissal Without Prejudice of its suit, and the investigation was terminated. Miriam Wilkinson 114. In response to law enforcement raids and public criticism, one of the measures taken by Allied Veterans was to cultivate a relationship with Miriam Wilkinson, during the time that she was the Assistant Director, Division of Consumer Services for the Agriculture Department. A lobbyist for Allied Veterans met with Wilkinson as part of Allied Veterans' unsuccessful efforts to change Florida law regarding game promotion. In 2010, Wilkinson further assisted the cause of Internet Casinos by testifying as a witness in a criminal trial in Marion County, Florida (State of Florida v. Jeaneen E. Crisante, defendant). 115, In December 2009, Wilkinson sent an e-mail to her supervisor advising that she had told the prosecutor that it would not be appropriate for the Agriculture Department to send someone to testify: Well, I have spoken several times to the prosecutor down in Ocala, but he told me 3 weeks ago that no one from the Dept would be called to testify (after I told him we could not testify as to the information he wanted, and that it would be inappropriate for us to do so). Plus, that was Don Fiechter's group anyway, not Bill's. I can't recall talking the prosecutor in the St Pete/Clearwater, and about a month or so ago I told Bill I would be out of town. I'm glad Eric is handling this. 87 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 99 of 130 116. Wilkinson's supervisor replied as follows: This entire deal has been a zoo, Bill said the prosecutor is the one that told him you were out town. It evidently is being tried in the 5th circuit(?) and someone from there may have talked with you. You were on the witness list. Basically, we told him we would not produce the statistics he wants and certify them but Eric was adamant that we did not need to participate in this. Tony was adamant that it was inappropriate for anyone from investigations to either. As of this morning, my understanding is that Bill knows that we will move to quash if a subpoena is issued. 117. On October 5,2010, Wilkinson was advised that she would be subpoenaed for the Crisante trial by the defense. On October 7, 2010, Mathis (who was defending Crisante) sent an e-mail to Wilkinson that attached a document called "Wilkinson Outline". This outline contained the areas that Mathis intended to cover on his direct examination of Wilkinson during the trial. 118. Wilkinson testified at the trial in October 2010. In her testimony, Wilkinson stated, among other things, that the Agriculture Department regulates game promotions, that an operator has to submit an application, that her department makes a determination whether or not that person is proposing to do falls within the definition of game promotion under the statute, that her department did not have a problem with "electronic sweepstakes," and that she did not believe that the "spinning wheels" used at Cristante's location disqualified it from being a sweepstakes. Wilkinson testified that the Agriculture Department did not evaluate whether the product or service was real and that it was left to law enforcement, not the Agriculture Department, to decide whether something constituted a slot machine or violated a Florida criminal statute. Cristante was acquitted by the jury. 88 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 100 of 130 119. In November 2010, a new Agriculture Commissioner was elected, and Wilkinson resigned her position in December 2010. Wilkinson started working at the Mathis law firm. In January 2011, Wilkinson testified on behalf of Allied Veterans before the Board of County Commissioners in Seminole County, Florida. In her testimony, Wilkinson stated that the "electronic sweepstakes" were "vetted through the General Counsel's office, the Deputy Commissioner, and Commissioner Bronson himself," that, in her opinion, they were "lawful," that they were "not simulated gambling," and that "what's missing is consideration." Wilkinson acknowledged that it was up to law enforcement to decide whether what was "going on inside of these places was gambling": I mean we always, the Department took the position that it was really a matter for local law enforcement. If they believe that what was going on inside of these places was gambling, then it was up to them to go in, seize the machines have the source codes forensically analyzed, and show that that's what they were doing. The Internet Casinos Have Generated Substantial Gambling Proceeds 120. Since 2007 and continuing through the present, Duncan, Bass, Burns, and others have been operating an illegal gambling business in the Middle District of Florida and elsewhere. Based on a review of bank records and other investigation, there is probable cause to believe that the gambling business involves five or more persons who conduct, manage, finance, supervise, direct, or own all or part of the gambling businesses and such businesses have been in continuous operation for a period of excess of thirty (30) days and the business received gross revenue in excess of $2,000 in any single day. Only 'five locations are detailed in this affidavit: 89 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 101 of 130 a. Affiliate 67 is located in Seminole County, Florida and has been in continuous operation from at least May 2009 to the present. From May 2009 through January 2012, there have been over 700 deposits of gambling proceeds into the bank account totaling more than $9,000,000. b. Affiliate 33178 is located in Volusia County, Florida and has been in continuous operation from at least September 2007 to the present but is now operating under a different name. From September 2007 throUgh September 2010, there have been over 900 deposits of gambling proceeds into the bank account totaling more than $17,000,000. c. Affiliate 31 is located in Lake County, Florida and has been in continuous operation from at least May 2007 to the present but now operating under a different name. From May 2007 through January 2012, there have been over 1,000 deposits of gambling proceeds into the bank account totaling more than $10,000,000. d. Affiliate 41 is located in Brevard County, Florida and has been in continuous operation from on or about December 2007 to the present but now operating under a different name. From January 2009 through January 2012, there have been over 500 deposits of gambling proceeds into the bank account totaling more than $12,000,000. e. Affiliate 43 is located in Duval County, Florida and has been in continuous operation from at least August 2007 to the present. From August 2007 through January 2012, there have been over 1,000 deposits of gambling proceeds into the bank account totaling more than $17,000,000. 90 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 102 of 130 Money Laundering 121. There is probable cause to believe that Duncan, Bass, Burns, and others have engaged in monetary transactions in criminally derived property that was derived from a specified unlawful activity. The chart below details some, but not all, of the financial transactions that have been conducted: Example: In the first transaction described below, the "Affiliates" have already deposited the illegal funds into their bank account and subsequently (on a weekly basis described above) transferred 10 percent of the illegal funds to Allied Management. Allied Management then moved the illegal funds through other entities and used them to purchase property for Duncan's company. Account Origin Allied Management, Bank of America Acct 8705 Allied Management, Bank of America Acct 8705 Allied Management, Bank of America Acct 8705 Date of Transfer Check # 1271 dated 12/3112009 Check # 1271 dated Amount $1,250,000 $1,250,000 12/31/2009 Check #1715 dated 7/27/2010 $325,000 I Account Received Allied Veterans Bank of America Acct 1680 Date of Transfer Check # 1796 dated Amount $1,000,000 111/2010 Allied Veterans, Bank of America Acct 1680 Check # 1797 dated Allied Veterans, Bank of America Acct 1680 Check # 2038 dated $174,000 111/2010 7/28/2010 91 $325,000 Acct Received Automated X-100, Bank of America, 4344 Automated X?100, Bank of America, 4344 Automated X?100, Bank of America, 4344 Date Amount Check # 3174 dated $549,572.89 Purchase Cashier'S Check to purchase 1965 SR 16, St Augustine, FL $283,564.67 Purchase Cashier's Check to purchase 1098 Asheville, 1/512010 Check # 3192 dated 2/12/2010 Hwy, Spartanburg, SC Check # 3223 dated 7/30/2010 $269,823.86 Purchase Cashier's Check to purchase 390 A1A, St Augustine,FL Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 103 of 130 Allied Management, Bank of America Acct 8705 Check #1863 dated Allied Management, Bank of America Acct#8705 check #1864 dated Allied Management, Bank of America Acct#8705 Check #2444 dated Allied Management, Bank of America Acct#8705 Check #2545 dated Allied Management, Bank of America Acct#8705 Check # dated Allied Management, Bank of America Acct#8705 Check #2727 dated $74,500 10/10/2010 $105,660.4 5 10/10/2010 $58,866.81 10/26/2011 $42,175.73 1/30/2012 $47,417.36 8/5/2012 $85,400.00 10/3/2012 122. All Pro Tax and Accounting, Palmetto Bank Acct#9183 All Pro Tax and Accounting, Palmetto Bank Acct#9183 All Pro Tax and Accounting, Palmetto Bank Acct#9183 All Pro Tax and Accounting, Palmetto Bank Acct#9183 All Pro Tax and Accounting, Palmetto Bank Acct#9183 All Pro Tax and Accounting, Palmetto Bank Acct#9183 Check # 1140 dated $36,000 Scott Pruitt, Palmetto Bank, $108,000 Johnny or Linda Duncan, Bank of America, Acct Linda Duncan, Bank of America 11/26/2010 Check #1147 dated 12/14/2010 Check #1280 dated $58,000 10/28/2011 $10,001.50 Check #1323 dated 1/31/2012 Scott Pruitt, Palmetto Bank During this investigation, investigators have identified a number of financial transactions where proceeds from the illegal gambling operation were deposited into the bank accounts of the for-profit companies that operated the Internet Casinos and then were transferred, by interstate wire, through an account of a professional employment organization, Employer's Resource Group, at International Bank of Commerce, or transferred via a check to other bank accounts. The following chart includes some of those transactions: Originating Account Date Amount Receiving Account Date Amount Receiving Account Affiliate #31. Bank of America, Acct #1457 8/5/2009 $32,719.88 Teamwork Management LLC, Bank of America, Acct#7486 8/19/2009 $20,000.00 International Internet Technologies LLC, Mid First Bank, Acct# 4441 92 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 104 of 130 Affiliate #31. Bank of America, Acct #1457 10/6/2010 $40,700.55 Grant Park LLC, Bank of America, Acct#4420 10/5/2010 $18,302.81 Affiliate #31. Bank of America, Acct #1457 2/17/2010 $14,598.41 International Internet Technologies LLC, Bank of America, Acct# 2/18/2010 $12,828.03 Affiliate #31. Bank of America, Acct #1457 12/9/2010 $13,644.59 International Internet Technologies LLC, Bank of America, Acct #0030 4275 1194 12/17/2010 $26,400.00 Affiliate #31. Bank of America, Acct #1457 12/30/2011 $49,183.30 Grant Park LLC, Bank of America, Acct#4420 12/30/2011 $48,201.19 Affiliate #33. Bank of America, Acct #2230 0244 1664 6/10/2009 $11,174.74 6/18/2009 $30,000.00 Affiliate #33. Bank of America, Acct #2230 0244 1664 10/6/2010 $12,510.04 Allied Veterans Management Group Inc., Bank of America, Acct #2230 06898705 Allied Veterans Management Group Inc., Bank of America, Acct #2230 06898705 10/6/2010 $23,500.00 Affiliate #33. Bank of America, Acct #2230 0244 1664 101712009 $24,909.45 10/15/2009 $25,000.00 Media Advice, Bank of America, Acct #0055 0801 2058 8/8/2012 $20,896,76 Affiliate #43, Bank of America, Acct 2230 0269 1702 3/12/2008 $47,313.69 3/14/2008 $45,000.00 Brad D. Skidmore, Bank of America, Acct #0057 4465 4982 Affiliate #43, Bank of America, Acct 2230 0269 1702 12/9/2009 $10,269.93 12/14/2009 $50,000.00 Affiliate #43, Bank of America, Acct 2230 0269 1702 41712010 $70,448.78 4/16/2010 $63,000.00 Automated X-100 Services Inc., Bank of America, Acct #0034 4794 4344 MichaelW. Ryles, Bank of America, Acct #0089 8338 4528 Affiliate #43, Bank of America, Acct 2230 0269 1702 7/14/2011 $59,068.33 7/15/2011 $20,000 Affiliate #43, Bank of America, Acct 2230 0269 1702 12/30/2011 $85,737.41 International Internet Technologies LLC, Bank of America, Acct #0030 4275 1194 International Internet Technologies LLC, Bank of America, Acct #0030 4275 1194 Seaside Internet, LLC, Bank of America, Bank of America, Acct #8980 04032707 Allied Veterans Management Group Inc., Bank of America, Acct #2230 06898705 Seaside Internet, LLC, Bank of America, Bank of America, Acct #8980 04032707 Seaside Internet, LLC, Bank of America, Bank of America, Acct #8980 04032707 Seaside Internet, LLC, Bank of America, Bank of America, Acct #8980 04032707 1/6/2012 $20,000 93 Anthony Parker, Wachovia NKA Wells Fargo, Acct #1010116226330 Mathis and Murphy PA, Jacksonville Bank, Acct #0000022756 Beyers Productions LLC, Citizens Bank of Pennsylvania, Acct #621250- 957-7 James Michael Hill, Legacy Bank, Acct #unknown Scott Pruitt, Palmetto Bank, Acct # Unknown The McCormick Agency, Amsouth Bank nka Regions Bank, Acct #0038416263 Republican Party of Florida, Suntrust, Acct #079700574350 Seaside Technologies, Cresent Bank, Acct #0258000397 Seaside Technologies, Cresent Bank, Acct #0258000397 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 105 of 130 Affiliate #41 , Bank of America, Acct #2230 0269 2905 6/1612011 $35,799.71 Game Advice, Bank of America, Acct #8980 1388 3811 6/2212011 $15,000 Aamir Waheed, Bank of America, Acet #0034 3022 8921 Cynthia Weaver, Bank of America, Acct Unknown Affiliate #41, Bank of America, Acct #2230 0269 2905 Affiliate #41, Bank of America, Acct #2230 0269 2905 10/6/2011 $36,201.56 10/12/2011 $30,000 12130/2011 $11,941.33 Affiliate #67, Bank of America, Acct #2772 101712009 $60,198.45 Game Advice, Bank of America, Acct #8980 1388 3811 International Internet Technologies LLC, Bank of America, Acet #0030 4275 1194 Digitrac Inc., Bank of America, Acct #8980 03120885 10/812009 $20,000.00 Aamir Waheed, Bank of America, Acet #0034 3022 8921 Affiliate #67, Bank of America, Acct #2772 101612010 $67,088.04 Digitrac Inc., Bank of America, Acct #8980 03120885 10/612010 $50,000.00 Aamir Waheed, Bank of America, Acct #0034 3022 8921 Digitrac Inc., Bank of America, Acct #898003120885 8/8/2012 $41,756.80 International Internet Technologies LLC, Bank of America, Acct #0030 4275 1194 Additional Information Regarding Documents and Electronic Evidence 123. I have been advised of the following additional information regarding the undercover inspections of the Internet Casinos identified in paragraph 5 above that were conducted between the dates of January 9,2012 and April 20, 2012: a. At every location, investigators observed "game?stations" that are used by customers. Almost every "game station" consists of a computer monitor, computer tower, keyboard, and mouse (at some locations, there were "game stations" with no keyboard). At some of the locations, the "game stations" are housed in computer cabinets giving the appearance of standalone slot machines, while at other locations the "game stations" are located on counter tops. b. At every location, investigators observed a computer terminal located at the cashier. 94 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 106 of 130 c. At every location, there is a "kiosk" machine. A "kiosk" machine is a device similar to that of an ATM machine. A customer can input money into the "kiosk" machine and purchase more "internet time". The "kiosk" machine is connected to the "server" and cashier cornputer terminal that are at each location, which allows the amount of "internet time" purchased to be placed onto the customer's account without going to the cashier to do so. d. At every location, investigators observed an ATM machine. Investigators have determined that many of the ATM machines are owned by individuals who operate, and profit from, the operation of the Internet Casinos. e. Captain Sammy Gibson of the Seminole County Sheriff'S Office observed several items located in or near the cashier or office area of each Internet Casino. There are "Customer Entry Forms" that are located at the cashier counter that must be filled out by each first time customer to that specific location. This form contains the customer's name, address and signature. The form is then given to the cashier, who inputs this information into the liT computer system for the purposes of generating a customer account for that particular customer. Investigators also observed a form that consists of "winners" of the "sweepstakes." This form has the customer's name and address on it, as well as what appears to be the logo of the Agriculture Department. The Florida game promotion statute requires operators to record the winners in any sweepstakes and report those who win more than $25. Captain Gibson has determined that none of the locations have submitted this form to the Agriculture Department. 95 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 107 of 130 f. Captain Gibson observed "receipts" generated by the cashier when customers cash out their winnings. These receipts indicate the date and amount of money paid to customers. At some locations, a copy of the receipt was given to the customer. At some locations, a copy of the receipt was not given to the customer, but was kept by the Internet Casino. g. Captain Gibson observed various business documents at the cashier counter, including, but not limited to, employee work schedules, notes to employees, phone listings, and various documents that appear to be business documents. These items are generally located behind the cashier counter and not accessible to the public. h. Captain Gibson observed filing cabinets, storage cabinets and office desks that could contain business related documents in the cashier area or office area of the Internet Casinos. 124. On August 20,2012 and August 30,2012, investigators again conducted undercover operations on all the former "Affiliate" locations. The Investigators found that the locations required first time players to complete an entry form, that the locations had the Agriculture Department form for "winners" of the "sweepstakes," that receipts were provided to customers, and that there were various other business related documents located behind the cashier area. The Investigators also noted that the set up of each location was mostly the same as the previous undercover inspection. 125. Captain Gibson participated in the execution of a search warrant in July 2010 at Affiliate 67, located at 3030 E. State Road 436, Apopka, in Seminole County, Florida. During the search, agents seized or observed game stations (to include 96 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 108 of 130 computer monitors, computer towers, key boards, mouses), kiosk machines, ATM machine, various customer and business documents, and cash. Captain Gibson has also obtained inventory records from the execution of search warrants on Affiliate 47 (Pinellas County) and Affiliate 42 (Jackson County). The property seizure documents indicate that law enforcement officials seized computers, cash, and business records consistent with the observations made by Captain Gibson between January 9,2012 and April 20, 2012. 126. As noted above, Farley conducted an "independent" review and examination of the software being used at the Internet Casinos in Leon County, Florida that use the Allied Veterans name. The following are some additional excerpts from that report: a. Section V- Review of Source Code and System Software Identification of the report states as follows:, International Internet Technologies, LLC has provided Nick Farley and Associates Inc. with the software source code associated with the International Internet Technologies, LLC liT Sweepstakes Promotion system, including Game Server, Cashier Station, and Game Station. The review and evaluation of software source code is essential in establishing game operation and game outcome determination. * * * The software associated with operating the liT Sweepstakes Promotion system is housed on the hard disk drives of each respective component associated with the system. The software housed on these hard disk drives controls the sweepstakes processes, including elements that affect sweepstakes integrity and sweepstakes outcome determination. b. Section VI- Findings of Conclusions #2 asks, "Whether the system of finite pools of entries is capable of manipulation or alteration during the course of the sweepstakes drawings?" In response, Farley states, "The sweepstakes entries and the respective prize values are stored in text-based pool files. The entries are shuffled and 97 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 109 of 130 installed on the system prior to the beginning of the sweepstakes. A text file has the ability to be modified. However, in order to do so, one would have to have access to the computer that stores the text file, which involves entering a password to allow access to view and modify these files. Such access is restricted to International Internet Technologies, LLC personneL" c. Section VI, # 8 of the report states, "A determination of whether there is any way to manipulate or 'rig' the result of the entries after the pool has been defined." In response, Farley states, "As stated above in item 2, the pool is a text file, which is manually modifiable. However, in order to modify that text file, one would need to have access to those files on the computer which would only be accessible to those with high level security access passwords reserved only for staff of International Internet Technologies, LLC. The software applications themselves which are part of the Cashier Station terminal do not have the ability to alter the text based pool files." d. Section VI. # 12 of the report states, "Whether the software operates as a slot machine and any factors which distinguish its operation from that of a slot machine." In response, Farley stated: Unlike a traditional slot machine, the Game Station terminal reviewed was a standard Windows-based PC computer with a hard disk drive. keyboard, and a mouse. similar to a home computer. The Game Station terminal reviewed did not include a ticket printer, coin dispenser, or bill acceptor, which would be required to facilitate financial transactions at the Game Station terminal. All financial transactions using currency are performed at the Cashier Station terminal by an attendant. Also, the outcome of a traditional slot machine is determined by the random number generator, which determines the stop positions of each of the separate spinning reels. When a wager is made, the reel positions are determined and the reels spin and stop to reveal the symbols which may merit a prize. In this sweepstakes system, the prizes are finite and pre- 98 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 110 of 130 determined. The prize is evaluated by the system and then displayed to the player via an entertaining display. The entertaining display comes from the sweepstakes entry and result which was pre-determined; there is no random determination of a game or prize result. e. Farley explained that "[g]iven that there are no specific regulatory specifications available for sweepstakes systems of this nature, this document is NOT intended to express any opinion as to whether this sweepstakes system is authorized under any specific state law." 127. In connection with a forfeiture hearing on July 19, 2008 with the Hill prosecution, a detective with the Pinellas County Sheriffs Office described a situation where someone "remote accessed" the server at Affiliate 47 during execution of the search warrant: During the time when I was generating the report, the server on-site that controlled all 61 machines was remote accessed from another person at a different location in an attempt to corrupt or remove any evidentiary items such as that program that I can generate master sales. Had I not been overpowered if you will by that remote access terminal, I could have generated a report showing how much money was received and paid out and print, fax, copy payments that were taken in by the business since its inception. The detective further explained: I conducted a daily report, and I conducted that month long. Any my next object would have been to conduct up until January 1st through May 28th to identify the amount of monies received and/or paid out. But I was remote accessed, that we believe there was a second terminal that was connected, audio and video surveillance through an IP address to where once conducted our execution of the search warrant, someone, some entity at a different location was able to observe that and there began their corruption or shutdown procedures if you will for that master terminal. 99 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 111 of 130 Computers. Electronic Storage. and Forensic Analysis 128. For purposes of this affidavit, the following are definitions of some technical terms used in this affidavit: a. IP Address: The Internet Protocol address (or simply "IP address") is a unique numeric address used by computers on the Internet. An IP address looks like a series of four numbers, each in the range 0-255, separated by periods (e.g., 121.56.97.178). Every computer attached to the Internet computer must be assigned an IP address so that Internet traffic sent from and directed to that computer may be directed properly from its source to its destination. Most Internet service providers control a range of IP addresses. Some computers have static-that is, long-term-IP addresses, while other computers have dynamic-that is, frequently changed-IP addresses. b. Internet: The Internet is a global network of computers and other electronic devices that communicate with each other. Due to the structure of the Internet, connections between devices on the Internet often cross state and international borders, even when the devices communicating with each other are in the same state. c. Storage medium: A storage medium is any physical object upon which computer data can be recorded. Examples include hard disks, floppy disks, flash memory, CD-ROMs, servers, and several other types of magnetic or optical media not listed here. 129. As described above and in Attachment B to each search warrant, this application seeks permission to search for records that might be found at the Target 100 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 112 of 130 Location, in whatever form they are found. One form in which the records might be found is data stored on a computer's hard drive or other storage media. Thus, the warrant applied for would authorize the seizure of electronic storage media or, potentially, the copying of electronically stored information, all under Rule 41 (e)(2)(8). submit that if a computer or storage medium is found at the Target Location, there is probable cause to believe those records will be stored on that computer or storage medium, for at least the following reasons: a. 8ased on my training, experience, this investigation, and conversations with computer forensic personnel, I know that computer files or remnants of such files can be recovered months or even years after they have been downloaded onto a storage medium, deleted, or viewed via the Internet. Electronic 'files downloaded to a storage medium can be stored for years at little or no cost. Even when files have been deleted, they can be recovered months or years later using forensic tools. This is so because when a person "deletes" a file on a computer, the data contained in the file does not actually disappear; rather, that data remains on the storage medium until it is overwritten by new data. b. Therefore, deleted files, or remnants of deleted files, may reside in free space or slack space-that is, in space on the storage medium that is not currently being used by an active file-for long periods of time before they are overwritten. In addition, a computer's operating system may also keep a record of deleted data in a "swap" or "recovery" file. c. Wholly apart from user-generated files, computer storage media- in particular, computers' internal hard drives-contain electronic evidence of how a 101 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 113 of 130 computer has been used, what it has been used for, and who has used it. To give a few examples, this forensic evidence can take the form of operating system configurations, artifacts from operating system or application operation, file system data structures, and virtual memory "swap" or paging files. Computer users typically do not erase or delete this evidence, because special software is typically required for that task. However, it is technically possible to delete this information. d. Similarly, files that have been viewed via the Internet are sometimes automatically downloaded into a temporary Internet directory or "cache." 130. Forensic evidence. As further described in Attachment B, this application seeks permission to locate not only computer files that might serve as direct evidence of the crimes described on the warrant, but also for forensic electronic evidence that establishes how computers or storage medium were used, the purpose of their use, who used them, and when. Based on my training, experience, this investigation, and conversations with computer forensic personnel, there is probable cause to believe that this forensic electronic evidence will be on any computer at the Target Location because: a. Data on the storage medium can provide evidence of a 'file that was once on the storage medium but has since been deleted or edited, or of a deleted portion of a file (such as a paragraph that has been deleted from a word processing file). Virtual memory paging systems can leave traces of information on the storage medium that show what tasks and processes were recently active. Web browsers, e- mail programs, and chat programs store configuration information on the storage medium that can reveal information such as online nicknames and passwords. 102 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 114 of 130 Operating systems can record additional information, such as the attachment of peripherals, the attachment of USB flash storage devices or other external storage media, and the times the computer was in use. Computer file systems can record information about the dates files were created and the sequence in which they were created. b. Forensic evidence on a computer or storage medium can also indicate who has used or controlled the computer or storage medium. This "user attribution" evidence is analogous to the search for "indicia of occupancy" while executing a search warrant at a residence. For example, registry information, configuration files, user profiles, e-mail, e-mail address books, "chat," instant messaging logs, photographs, the presence or absence of malware, and correspondence (and the data associated with the foregoing, such as file creation and last-accessed dates) may be evidence of who used or controlled the computer or storage medium at a relevant time. c. A person with appropriate familiarity with how a computer works can, after examining this forensic evidence in its proper context, draw conclusions about how computers were used, the purpose of their use, who used them, and when. d. The process of identifying the exact files, blocks, registry entries, logs, or other forms of forensic evidence on a storage medium that are necessary to draw an accurate conclusion is a dynamic process. While it is possible to specify in advance the records to be sought, computer evidence is not always data that can be merely reviewed by a review team and passed along to investigators. Whether data stored on a computer is evidence may depend on other information stored on the 103 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 115 of 130 computer and the application of knowledge about how a computer behaves. Therefore, contextual information necessary to understand other evidence also falls within the scope of the warrant. e. Further, in finding evidence of how a computer was used, the purpose of its use, who used it, and when, sometimes it is necessary to establish that a particular thing is not present on a storage medium. For example, the presence or absence of counter-forensic programs or anti-virus programs (and associated data) may be relevant to establishing the user's intent. f. Based on my training, experience, this investigation, and conversations with computer forensic personnel, I know that when an individual uses a computer or server to communicate via e-mail or wire to liT in Oklahoma or to input information into a customer database, the individual's computer or server will generally serve both as an instrumentality for committing the crime, and also as a storage medium for evidence of the crime. The computer, server, or storage medium is an instrumentality of the crime because it is used as a means of committing the criminal offense. The computer or server is also likely to be a storage medium for evidence of crime. From my training and experience, I believe that a computer used to commit a crime of this type may contain: data that is evidence of how the computer was used; data that was sent or received; notes as to how the criminal conduct was achieved; records of Internet discussions about the crime; and other records that indicate the nature of the offense. 131. Necessity of seizing or copying entire computers or storage media. In most cases, a thorough search of a premises for information that might be stored on 104 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 116 of 130 storage media often requires the seizure of the physical storage media and later off-site review consistent with the warrant. In lieu of removing storage media from the premises, it is sometimes possible to make an image copy of storage media. Generally speaking, imaging is the taking of a complete electronic picture of the computer's data, including all hidden sectors and deleted files. Either seizure or imaging is often necessary to ensure the accuracy and completeness of data recorded on the storage media, and to prevent the loss of the data either from accidental or intentional destruction. This is true because of the following: a. The time required for an examination. As noted above, not all evidence takes the form of documents and files that can be easily viewed on site. Analyzing evidence of how a computer has been used, what it has been used for, and who has used it requires considerable time, and taking that much time on premises could be unreasonable. As explained above, because the warrant calls for forensic electronic evidence, it is exceedingly likely that it will be necessary to thoroughly examine storage media to obtain evidence. Storage media can store a large volume of information. Reviewing that information for things described in the warrant can take weeks or months, depending on the volume of data stored, and would be impractical and invasive to attempt on-site. b. Technical requirements. Computers can be configured in several different ways, featuring a variety of different operating systems, application software, and configurations. Therefore, searching them sometimes requires tools or knowledge that might not be present on the search site. The vast array of computer hardware and software available makes it difficult to know before a search what tools or knowledge 105 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 117 of 130 will be required to analyze the system and its data at the Target Location. However. taking the storage media off-site and reviewing it in a controlled environment will allow its examination with the proper tools and knowledge. c. Variety of forms of electronic media. Records sought under this warrant could be stored in a variety of storage media formats that may require off-site reviewing with specialized forensic tools. 132. Nature of examination. Based on the foregoing. and consistent with Rule 41 (e)(2)(B). the warrant I am applying for would permit seizing or imaging computers or storage media that reasonably appear to contain some or all of the evidence described in the warrant. thus permitting its later examination consistent with the warrant. The examination may require techniques. including but not limited to computer-assisted scans of the entire medium. that might expose many parts of a hard drive to human inspection in order to determine whether it is evidence described by the warrant. 133. If a server located at the Target Location needs to be taken off-site for imaging. a forensic copy will be made of the server. and the server will be returned to liT within a reasonable period of time. Investigators will then examine the forensic copy of the server. Conclusion 134. Based on investigation conducted to date, the game stations located at the Internet Casino locations identified in paragraph 5 above are slot machines under Florida law. As reflected in paragraphs 39-42 and 83-94, the games do not constitute a drawing by chance or a game promotion under Florida law. As a result. there is probable cause to believe that Allied Veterans and others were involved in conducting, 106 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 118 of 130 financing, managing, supervising, directing, and owning illegal gambling businesses in Florida involving slot machines that earned, after deducting prize pay-outs, over $290 million from 2007 to the present. 135. In an effort to mislead the public into believing that they are not profiting from an illegal gambling enterprise, Allied Veterans and others have engaged in a conspiracy and scheme to defraud. Based on investigation conducted to date, this conspiracy and scheme to defraud has consisted of, among other things, the following types of representations: a. Falsely representing that the Internet Casinos that used the Allied Veterans name were "fundraising centers" for Allied Veterans to raise money to directly benefit its charitable causes, when, in truth and in fact, the primary purpose of the Internet Casinos was to make profits for Allied Management, liT, the for-profit companies that operated the Internet Casinos, and the individuals who owned those businesses (as is further described in paragraphs 30-34); b. Falsely representing that a Section 501(c)(19) Veterans Organization owned and operated the Internet Casinos until they were allegedly "sold" in April 2012 (as is further described in paragraphs 35-42); c. Falsely represent that Allied Veterans was a member of the Veterans Administration (as is further described in paragraphs 43-45); d. Falsely representing that the money spent, and lost, at the Internet Casinos that used the Allied Veterans name went directly to a Section 501 (c)( 19) Veterans Organization that would donate the net proceeds to charity (as is further described in paragraphs 46-53); 107 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 119 of 130 e. Falsely representing the portion of funds received by the Internet Casinos that would be donated to charity (as is further described in paragraphs 54-62); and f. Falsely representing that the games operate through the use of "finite pool," that an individual who receives free entries can win the same prizes as someone who makes a purchase, and that it does not matter how a player chooses to play the games (as is further described in paragraphs 84-92). 136. To further this conspiracy and scheme to defraud, Allied Veterans and others used, or caused to be used, interstate wires in the form of wire transfers of proceeds (as is further described in paragraph 122) and communications between and among the liT server in Oklahoma and the Internet Casinos in Florida (as is further described in paragraphs 26,95-100,109-11,126-27,130), among other things. Allied Veterans and other also used, or caused to be used, the United States mail to send communications that furthered the scheme to defraud (as is further described in paragraphs 54, 55). 137. The result of this conspiracy and scheme to defraud is that Allied Veterans and others have enriched themselves. As noted above, more than $250 million of the proceeds received from the Internet Casinos were paid to liT and the for-profit companies that operated the Internet Casinos, as opposed to being provided to Allied Veterans to donate to charity. As a result, the amount of donations made by Allied Veterans is only about 2% of the total that has been earned. Allied Veterans and others have used the proceeds of their operation to launder millions of dollars (as is further described in paragraphs 121-22). 108 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 120 of 130 138. Based on the foregoing, I believe that there is probable cause to believe that certain fruits, evidence and instruments of violations of Title 18, United States Code, Sections 371, 1341, 1343, 1349, 1955, 1956, and 1957, more particularly described in Attachment B to the search warrant, will be found at the Target Location identified in Attachment A when the search warrant is executed. Wherefore, I respectfully request a search warrant authorizing the search of the premises located at the Target Location identified in Attachment A to the search warrant, and the seizure of the items identified in Attachment B to the search warrant. Attachments A and B of the search warrant are incorporated by reference herein. 139. This concludes my affidavit. Mic ael Favors, ecial Agent Internal Revenue Service - CID SUBSCRIBED AND S~ORN TO BEFORE ME THIS ~ DAY OF MARCH 2013. ,< 109 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 121 of 130 Attachment A Description of Premises 106 East Kansas Ave Anadarko, OK The building is stand alone building. The building is white brick with a red/orange front trim at the roof line. It has white paint on the windows they are encased with bars. There are no signs or writing on the building. Pictures Attached 106 East kansas Ave Anadarko, OK Case Document 1 Filed 03/11/13 Page 122 of 130 TO'5'East Kansas Ave Anadarko, OK Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 123 of 130 106 East kansas Ave K Anadarko, 0 Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 124 of 130 ATTACHMENT B ITEMS TO BE SEIZED a. For the period January 1, 2007 through the present, the following records and information that constitute evidence of the commission of, contraband, the fruits of crime, or instrumentalities of violations of Title 18, United States Code, Sections 371, 1341,1343,1349,1955, 1956, and 1957: i. All bank records of the Owner identified in Attachment A, including account statements, cancelled checks, deposit slips, and retained copies of deposit items, records of wire transfers both into and out of the bank accounts, checkbooks, deposit receipts, records of cashier's checks or money orders purchased from funds, and log books of wire transfers. ii. Any documents or forms containing tax return information used or designed for use in filing any federal, state, or local income tax return (including Forms 1120, Form 990, and Form 990T) for the Owner identified in Attachment A. iii. All source documents or books of original entry to include books, records, receipts, notes, ledgers, journals, minute books, correspondence, and any other documents related to the preparation of any federal, state, or local income tax returns for the Owner identified in Attachment A. iv. All workpapers, schedules, summaries or other documents used or designed for use to prepare documents described in paragraph ii or iii above. v. Any letters, correspondence, notes, or evidence of communication regarding financial transactions involving the Owner identified in Attachment A, Johnny Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 125 of 130 Duncan, Jerry Bass, Chase Burns, Allied Veterans of the World, Inc. & Affiliates, Inc., Allied Veterans Management Group Inc., and/or Allied Veterans of the World Affiliates 31 through 85, including email correspondence. vi. Any corporate records for the Owner identified in Attachment A. vii. Any records containing the name, address, phone number, social security number, Employer Identification Number, or other information establishing the identity of persons who are Florida customers of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc.. viii. ix. Instrumentalities of the alleged crimes, including any computer or server. Any correspondence between and among Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, the Owner identified in Attachment A, any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc., and/or anyone on their behalf, including e-mails. x. Any records related to any training provided to any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc., including, but not limited to, any manual, any record of any communication with such a location, and/or any records regarding non-compliance with required procedures. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 126 of 130 xi. Any records related to a Florida customer account database for Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xii. Any records related to any sweepstakes, game, and/or simulation used by any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc., including, but not limited to, any records regarding amount paid for internet time, number of entries provided, number of entries played, and/or amount of winnings, xiii. Any records related to the purchase of internet time and/or the use of that internet time for any Florida customer of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xiv. Any records related to the Second Chance Drawing, including records regarding amount of winnings, frequency of the drawing, and/or any rules regarding the drawing, for any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 127 of 130 xv. Any software that is used, or has been used, by the Florida locations of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xvi. Any communications by wire between the Owner identified in Attachment A and any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xvii. Any contract or agreements between and among any of the following: the Owner identified in Attachment A, Johnny Duncan, Jerry Bass, Chase Burns, Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xviii. Any records related to the software license for Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc., including, but not limited to, any records related to the termination or modification of any such license. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 128 of 130 xix. Any records related to any training that is provided, or has been provided, to any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xx. Any records related to any finite cartridge used by a Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xxi. Any records related to a customer's odds of winning a prize at a Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. xxii. Any records related to the liT Sweepstakes Promotion System used by any Florida location of Allied Veterans of the World, Inc. & Affiliates, Allied Veterans Management Group Inc., Allied Veterans of the World Affiliates 31 through 85, and/or any corporation or company that pays any portion of its earnings to Allied Veterans Management Inc. b. As used above, the terms records, documents, programs, applications or materials includes records, documents, programs, applications or materials created, modified or stored in any form. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 129 of 130 c. In order to search for data that is capable of being read or interpreted by a computer, law enforcement personnel will need to seize and search the following items, subject to the procedures set forth above: i. Any computer equipment and storage device capable of being used to commit, further or store evidence of the offense listed above; ii. Any computer equipment used to facilitate the transmission, creation, display, encoding or storage of data, including word processing equipment, modems, docking stations, monitors, printers, plotters, encryption devices, and optical scanners; iii. Any magnetic, electronic or optical storage device capable of storing data, such as floppy disks, hard disks, tapes, CDROMs, CD-R, CD-RWs, DVDs, optical disks, printer or memory buffers, smart cards, PC cards, memory calculators, electronic dialers, electronic notebooks, and personal djgital assistants; iv. Any documentation, operating logs and reference manuals regarding the operation of the computer equipment, storage devices or software. v. Any applications, utility programs, compilers, interpreters, and other software used to facilitate direct or indirect communication with the computer hardware, storage devices or data to be searched; vi. Any physical keys, encryption devices, dongles and similar physical items that are necessary to gain access to the computer equipment, storage devices or data; and vii. Any passwords, password files, test keys, encryption codes or other information necessary to access the computer equipment, storage devices or data. Case 5:13-mj-00115-P Document 1 Filed 03/11/13 Page 130 of 130 d. With respect to any server that is seized and taken off-site, the server will be returned to the Owner identified in Attachment A within a reasonable period of time after a forensic copy of the server is made (for further forensic examination).