TALLAHASSEE — Working undercover as just another aging patron, D. Robert Sertell watched as customers streamed into Internet cafes in strip malls across Florida to buy access to Internet time or long distance phone service.
As a national expert on slot machines, Sertell saw that the customers visiting the cafes operated by the Florida-based charity Allied Veterans of the World were not there to surf the Web or make phone calls. They came to play what he contends are illegal slot machines, complete with spinning wheels, cash payouts, and names such as Captain Cash, Lucky Shamrocks and Money Bunny.
Using a mouse as their lever and "sweepstakes" credits as their coins, customers played games that were nothing more than sophisticated, computerized slot machines, Sertell concluded after visiting 41 cafes, from Monroe County to Duval County, in early January.
"The little old ladies, whose eyes were fixated on the screen, would sit and play, their hand never leaving the mouse,'' he told the Times/Herald. "They refer to it as a casino. Every one of those machines is rigged. It's a game of chance."
Sertell, 71, known as "Father Slots" in the casino industry, is a slot machine expert from New Jersey who has built machines, written training and repair manuals, and become the expert of choice for law enforcement who want to know the difference between a computer that is rigged to operate like a slot machine and one that isn't.
He is expected to be a key witness for state and federal prosecutors in arguing that the electronic sweepstakes machines run by Allied Veterans at their 49 Internet cafes in Florida were illegal gambling operations, operating under the guise of a charity.
Authorities have charged 57 of the owners and operators with racketeering, illegal gambling and money laundering. The authorities have seized more than 400 computers and servers, 1,169 boxes of paper records, and 59 vehicles and vessels in six states in what they say is "phase one" of a continuing investigation into illegal operations at the centers. The authorities allege that Allied Veterans and its affiliates made $300 million in profits but gave only 2 percent — about $6 million — of their proceeds to charitable causes.
The allegations have prompted the Florida Legislature to move swiftly to pass a bill to clarify the state's sweepstakes law to make it easier for law enforcement to shut down the machines that legislators say are already illegal. The measure has passed the House and has one committee and a floor vote to pass in the Senate.
Proponents say it will give clarity to a murky state law that has stymied law enforcement who have attempted crackdowns for years as the industry fought back in court. Florida law broadly forbids gambling and machines that operate "any element of chance" except at approved locations, such as South Florida's pari-mutuel facilities. State law also says it is "the duty" of law enforcement to "seize and take possession" of gambling machines.
But Florida's enforcement of the law has been inconsistent as courts in some areas sided with the industry and its claim that these were games of skill, allowed under state law, or sweepstakes contests no different than those offered on a Coke can or at a McDonald's. Other courts agreed with law enforcement that the electronic games were reconfigured slot machines, and shut them down.
David O. Markus, a Miami lawyer who successfully defended a Pompano Beach penny arcade owner accused of running an illegal gambling house in 2006, convinced a jury that some machines do require an element of skill.
"It's not that they're 100 percent games of skill — no one would argue that,'' Markus told the Times/Herald. "It's that they have an element of skill, just like poker."
He brought players into the courtroom and demonstrated to the jury that the more experienced players could produce better results than rookies.
Markus called Sertell a "hired gun" who always testifies that the games are gambling devices. But, he noted, "the state rolled the dice against us and lost."
• • •
For Sertell, the evidence against Allied Veterans comes down to the guts of the machine and the play of the players.
Gaming centers operate, Sertell said, by selling a product that most people don't use — such as Internet access, minutes of long distance phone time, or even Red Box movie rentals.
"That's code for wink, wink, you are really buying minutes you will never use and for every $1 you purchase you will get 100 free entries" into the electronic sweepstakes game, Sertell explained.
But players don't use the Internet — the computer keyboard is tucked behind the monitor — and for every $1 they spend are given 100 entries or credits to play the sweepstakes game. They sit down at the screen, click on a waiver — that they agree it's not gambling — and then choose from a list of electronic games and are asked to wager or "reveal" the credits they had been given.
One spin of the wheel, which according to Sertell's analysis takes about six seconds, and the customer can wager up to 500 credits. For most people, that amounts to five times the free entries they were given when they purchased their Internet or phone time, "and it's all used up in six seconds,'' he said.
If a game results in a winning combination, the winning amount is automatically added to the total on the "win" meter. If a customer loses the free credits, he must purchase more Internet or phone time to continue play.
"We found customers who had months of phone time that were unused and yet they came back day after day to buy more and more,'' he said.
• • •
Critical to the operation of the profitable centers were the customer incentives to keep playing. Posters in the cafes advertised "instantly win cash," and players were offered free soda, coffee and snacks.
Sertell said he met people who could tell him when the free lunch or free dinner was, and could "predict what's going to be on the menu." He watched as people cashed personal checks, welfare checks, payroll checks and were then asked how many minutes they wanted to put on the access cards.
But Sertell contends in his affidavit for authorities that while 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," the computers have also been configured to operate like slot machines.
"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," he wrote in his affidavit.
While players win — "because if you don't win, you don't stay'' — Sertell said, he contends that payouts are intentionally limited. The operators decide how many "outcomes" they want to put in a sweepstakes game, what value each of the wins will be, and how many they will have.
"The presence of such a device would make that automatically illegal in any gaming jurisdiction," he said. "If you can throw a switch, that means the computer is controlling it, not the skill of any player."
If the biggest jackpot is $5,000, the next down is likely $1,000, and there might be 10 of those. It was not uncommon to see a game offer 20 prizes valued at $500, 50 prizes valued at $100, all the way town to 2-cent prizes, he said.
The operators say the winners are selected randomly, Sertell said, but "since the server is in a remote place, nobody can verify that."
• • •
Unlike the slot machines operated at the state's horse and dog tracks and regulated by the state, there is no regulation and no payout minimums offered to players operating the machines run by Allied Veterans and configured by International Internet Technologies, a gaming software company. The Oklahoma-based company allegedly earned $63 million from the $300 million Allied Vets operation.
Sertell's conclusion: "In my opinion, each of these locations was operating a gambling establishment and the machines or terminals themselves constitute slot machines and gambling devices as defined by Florida statutes 849.16,'' he wrote in the affidavit. "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.' "
In June 2011, Sertell was retained by the Miami City attorney to examine the machines that were seized as part of a crackdown on illegal gambling devices there. He examined the guts of the machines, as well as the service manuals, and concluded that the video terminals used in South Florida adult arcades and the maquinitas of Miami are self-contained gambling machines with computer logic boards.
The operator of the machines, known as "Cherry Masters," manages a logic board with eight different payout percentages that are rigged to cap winnings and can be set to stop big payouts before the number generator chooses a big win, he said.
"It happens in a millionth of a second, and the computer will set it again and again until it gets an outcome that fits at its setting,'' he said. "The human eye can never detect it."
The machine may be set to pay out 55 percent to 60 percent of all the money taken in, but, unlike regulated machines that have higher payouts and calculate the percentage on a mathematical cycle that might take six months, "these Cherry Masters are calculated every second,'' Sertell said.
Sertell finds the Florida Legislature's rush to ban the machines amusing. He has worked with the Seminole County Sheriff's Office, which has spent years warning lawmakers and law enforcement to crack down on the illegal machines, only to have the lawmakers reject the call as the industry flooded them with campaign donations.
"Isn't it amazing how Dudley Do-Right has rode the halls of the Capitol?'' Sertell said. "I've never before seen a Legislature act like they've all been shocked."
Mary Ellen Klas can be reached at [email protected]erald.com and on Twitter @MaryEllenKlas.