PALM HARBOR — State Rep. Peter Nehr has found a new venture to replace his failed flag shop and prop up his sagging financial fortunes: He has opened an Internet sweepstakes cafe, a type of business that Pinellas County Sheriff Jim Coats considers illegal gambling and has worked to keep out of the county.
Though Coats and his staff met with Nehr last year to talk about the sweepstakes cafe industry, Coats said he didn't know until Tuesday that Nehr had opened a sweepstakes cafe in a Palm Harbor strip center.
Coats wasn't the only official surprised by Nehr's new business. So was state Sen. Mike Fasano.
Fasano, sponsor of a bill in the state Senate to establish new controls over sweepstakes cafes, had recruited Nehr last fall to introduce a companion bill in the House, but Nehr chose not to file the bill. Nehr never told Fasano he was going into the sweepstakes business himself.
"I had no idea and I'm shocked," said Fasano, R-New Port Richey. "We reached out to Nehr and he agreed to it. We were disappointed that we were not able to get a House sponsor. I don't want to go beyond that."
Internet sweepstakes cafes are cropping up throughout Florida. They sell Internet time to customers, who then sit at computer terminals and access casino-style sweepstakes games. A small storefront cafe can make more than $20,000 a week.
The proliferation of the cafes has ignited a debate about whether they constitute illegal gambling. But to Pinellas County's sheriff, there is no debate: They are gambling operations, and in 2009 and again last December, Coats wrote letters to local cafes ordering them to shut down within 30 days or be subjected to investigation and possible prosecution.
Last May, Nehr and a Tallahassee lawyer, William Pfeiffer, came to see Coats. They wanted to know his stance on Internet sweepstakes cafes.
"I told them as far as I'm concerned, they are illegal," he said.
But Nehr, a Republican who represents north Pinellas County and a sliver of Pasco, contends he hasn't done anything illegal. "This is a legitimate business that has been vetted and found to be completely legal in the state," he said. "I'm entitled like anyone else to open a legal business to earn money for my family."
For 18 years, Nehr owned a flag shop in Tarpon Springs. He filed for personal bankruptcy in 2009 and for a while said that his legislative salary was his only income.
But on March 1, Nehr formed Fun City Phone Sales LLC. The same month he bought Fun City Sweepstakes at 38541 U.S. 19.
Behind the darkened windows are tables with 45 desktop computers. Customers buy a phone card and get 100 sweepstakes points for every $1 they spend for a card. It takes 25 points to play one sweepstakes game.
Customers swipe the card at the computer to play. With the click of a mouse, they can simulate the spinning images of a casino slot machine. Afterward, they collect their winnings from the cashier. Phone cards sold at Fun City can also be used to make long-distance phone calls outside the cafe.
Nehr said his cafe is a franchise of Phone-Sweeps, LLC, a Florida-based company that sells prepaid long distance telephone cards and licenses local Internet cafes. Represented by Pfeiffer, Phone-Sweeps cafes are in seven states. In Florida, the company has franchised cafes in Jacksonville, Gainesville, Alachua, Lake City, Daytona, Sarasota and Fort Lauderdale.
Nehr says what makes his business different and legal is that he sells a product: the phone card.
"The other establishments, there was never a prepaid phone card," he said. "Everyone else has been selling Internet time. I opened a store that sells prepaid long distance cards, and I promote it by having a sweepstakes . . . just like when you go to McDonalds and they have a game."
That makes little difference to Coats.
"As far as we are concerned, they are illegal," he said, adding that if he received any complaints about Nehr's business, "then we would send them a notice like we have in the past."
Because the cafes exist in a legal gray zone, each county has developed its own approach to them. While Coats has decided they are gambling and will not be allowed in Pinellas, other Tampa Bay counties, most notably Hillsborough and Hernando counties, have left the door open. Coats said he has been hoping the Legislature would clarify the situation for law enforcement.
That was one of Fasano's goals, too. Senate Bill 222 would have created new regulations over the cafes. But the lack of a House sponsor for the bill set Fasano's effort back.
Fasano said Nehr told him he didn't file the bill by the deadline because House leaders told him the bill had no chance. But in an interview with the St. Petersburg Times, Nehr said he decided not to file it because he "didn't want to submit a bill that made it look like it was self serving to me." He also said there was another bill moving in the Legislature that would ban the cafes entirely, making his bill pointless.
Without more legislation, the state has no enforcement power over sweepstakes cafes. Leaving enforcement up to each county is fueling the debate about the legality of the cafes.
"I believe they are legal," said Lawrence G. Walters, an Altamonte Springs lawyer who writes and presents on gaming issues. "The problem is, law enforcement claims that they look and feel too much like gambling, then it must be gambling. But until the Legislature changes the law, they are allowed to operate. This is going to have to be solved legislatively."
Walters said law enforcement is trying to bully cafe owners into shutting their doors.
"It's really just an effort to try and scare them out of existence. The industry is not backing down. They are well within their rights to present sweepstakes entertainment."
Bills to ban sweepstakes cafes have no chance of passing this year, said state Sen. Nancy Detert, chairwoman of the Committee on Commerce and Tourism.
No matter. Coats has a message for Nehr.
"We told you our opinion. You chose to open the business, you stand the risk."
Times staff writer Elisabeth Parker contributed to this report. Contact Demorris A. Lee at email@example.com or (727) 445-4174