Illegal gambling has saturated Southeast Texas in the form of game rooms using casino style coin-operated amusement machines known as “eight-liners.” Local authorities and the State Comptroller’s office say these “arcade games” have a potential legitimate use, but Sgt. Mike Custer of the Beaumont Police Department’s special assignments unit said he has never seen one being used legally. Rather than paying out in prizes valued at under $5, as is allowed by law, gamblers are receiving cash.
Police said in many cases the state comptroller’s office could do more damage to these illegal enterprises with a calculator than police can with a search warrant. In this final installment in a three-part series, The Examiner investigated the power of the comptroller and what is being done to punish offenders.
R.J. DeSilva, spokesperson for the state comptroller’s office, said his office works to ensure the proper licensing of amusement machines throughout Texas. He said they enforce the licensing and penalize those operators who do not comply with Texas law.
The coin-operated machines tax is in Chapter 2153 of the Texas Occupation Code and applies to various types of machines. Examples include pool tables, video games, jukeboxes and arcade games. The business sets the amount a customer pays to use any of these machines. A business that has these machines has to get a general business license or registration certificate from the comptroller’s office and pay an annual occupation tax on each machine.
The annual occupation tax is $60 per machine. If a business has machines at its own location, it gets a registration certificate, which costs $150 per year. If a business has machines it puts in another location, then it gets a general business license. The fee for a general business license is between $200 and $500 a year. The businesses can place the different types of machines at locations around the state, so the statewide number of machines is what is tracked by the comptroller’s office. Last year there were approximately 183,000 licensed machines, according to DeSilva. The machines must have decals issued by the state indicating they are licensed for operation.
According to DeSilva, only the state can issue the decals and machines are inspected thoroughly.
“We have criminal investigators and enforcement officers throughout the state that check for state tax compliance on all state taxes,” he said. “With the coin-operated machines law in the Texas Occupation Code, they enforce the occupation tax and inspect locations for licenses and occupation tax decals. If machines don’t have decals, they are sealed and cannot be used until fees and penalties are paid. Last fiscal year we sealed approximately 3,450 machines.”
The coin-operated machines law does not authorize gambling, which is illegal under Chapter 47 of the Texas Penal Code. Agency criminal investigators have authority under Chapter 14 of the Texas Code of Criminal Procedures to make an arrest if an offense occurs within their presence or within their view, including gambling violations, while conducting an inspection. Generally, local law enforcement agencies investigate gambling under the Texas Penal Code. Those law enforcement agencies contact the state comptroller if they need to check ownership information or other assistance as part of their investigations.
According to Custer, sealing or seizing the machines costs the illegal gambling operators a lot more than the Class A misdemeanor charge levied against them by police. With the machines out of use, the operators potentially lose thousands of dollars each day the machine is not properly licensed rather than a mere $4,000, the maximum amount for the misdemeanor charge. Custer said as the law stands now, the police are not able to enforce the licensing and cannot seize the property. Only the comptroller has that power due to restrictions in state legislation.
Crime and punishment
Custer said the Jefferson County District Attorney’s Office faces challenges in prosecuting illegal gambling operators, but they are working hard to convict offenders.
“The DA is helpful in prosecuting,” Custer said. “We work well with the DA on this, but it is just a tough case to make.”
As mentioned in The Examiner’s Oct. 4 issue, Beaumont Police have been pursuing illegal gaming operators and have made some progress. Arrests have been made in the past and some of the offenders have been prosecuted. Kamran Zaki, suspected of operating game rooms throughout Jefferson and Orange counties, was prosecuted after an investigation into potential gambling activities led authorities to uncover other illicit activities. According to police, Zaki ran several game rooms in Beaumont. Records held at the Jefferson County Courthouse show the only punishment placed on Zaki at the local level was forfeiture of roughly $11,000 in cash and the circuit boards from roughly 30 machines confiscated when officers raided one of Zaki’s alleged gambling businesses.
According to Zaki’s brother, Rajan Zaki, who called after seeing his brother in The Examiner, after the arrest, his brother was detained for four months at a facility in Houston. He maintains that his brother did not own the gambling business but could provide no supporting evidence. He said his brother was told to either leave the country or face federal prosecution and jail time. He indicated he could not reveal his brother’s location due to concern for his family’s safety but implied Kamran had left the country. Whether he fled or was deported by authorities remains in question. Local Immigration and Customs Enforcement (ICE) officers would not release the information, saying it is protected under privacy laws.
More recently, the Jefferson County District Attorney filed a case against Farid Datoo on May 7 of this year for “promotion of illegal gambling,” a Class A misdemeanor, on or around March 29. The Jefferson County Sheriff’s Office arrested Datoo on May 8. A hearing regarding the charges is scheduled for Thursday, Oct. 18, at 9 a.m. at the Jefferson County Courthouse. The complaint against Datoo states he “unlawfully, intentionally and knowingly operated and participated in the earnings of a gambling place and for gain became the custodian of money of bets and money offered for bets.”
This is Datoo’s second arrest for promotion of gambling. He was arrested in June 2007 for the same charges he now faces. In January 2008, Jefferson County ordered Datoo to pay $11,596 considered “illegal gambling proceeds” by the court. Datoo had to surrender 54 machines used in illegal gambling, according to court documents. Components of the machines were removed to make them unusable.
The penalties assessed in 2007 apparently did not deter Datoo or others making huge profits from the illegal enterprise.
Custer said that around four years ago, officers raided a gambling den and seized over $10,000. Recently, he said the same operator was arrested and police found around $11,000 in what they believe to be illegal gambling proceeds. That is more than $20,000 for two days of business for the operator. The operator might have to forfeit the money, but Custer said that is just a drop in the bucket when compared to the profits they earn regularly.
Jefferson County Sheriff Mitch Woods said he agrees with Custer that the law as it stands now is ineffective in combating the problem of illegal gambling in the state of Texas. He said that change is necessary.
“We get complaints from time to time,” Woods said regarding the game rooms in Jefferson County. “We keep an eye on the places we hear about. This is going to be a recurring problem until the legislature does something to address the issue. We need to do more than charge (the operators) with a Class A misdemeanor. They are making too much money. They are going to continue to operate illegally. It’s not just in this area. It’s all over Texas. The legislature in all its wisdom thought people would really just use the machines for amusement and only payout with up to $5 in prizes. These places are making a ton of money operating illegally, paying out cash.”
Until these necessary changes are made by the state legislature, officers believe illegal gambling will continue in Texans.
This is the final installment in a three-part series. For Part 1 in this ongoing series, click here:
For Part 2, click here: