- Associated Press - Wednesday, May 6, 2015

RALEIGH, N.C. (AP) - Federal prosecutors announced Wednesday that they have reached an agreement with six large video sweepstakes companies that requires them to stop providing equipment and software to hundreds of Internet cafes in North Carolina.

The companies have agreed to cease all operations in the state by July 1, according to U.S. Attorney Thomas G. Walker, the top federal prosecutor for the Eastern District of North Carolina. In return, Walker’s office said it won’t prosecute the software companies for past illegal activities.

“We hope this action will be a big step forward in ensuring compliance with North Carolina’s gambling laws,” Walker said in a statement. “Our office is prepared to assist the state in enforcing large scale violations of the law.”

North Carolina legislators have repeatedly passed laws outlawing the games, which simulate gambling by providing players the impression money is being won or lost by mimicking Vegas-style slots.

Sweepstakes operators have continued to operate across much of the state while fighting the ban in court, claiming the activity is legal due to tweak made in the software. For example, rather than wagering cash, patrons can buy Internet access that comes with credits or points that can later be redeemed for a prize or something of value.

The companies named in Wednesday’s agreement provide software to more than 620 Internet cafes, including the one operated inside a large city-owned entertainment venue in Roanoke Rapids.

HSV Entertainment has agreed to terminate its lease to operate the Roanoke Rapids Theater by May 18. City officials have assured prosecutors they will no longer allow sweepstakes devices back in the theater after HSV leaves, according to federal prosecutors. The other companies involved are White Sands Technology, Sierra Software, TNT Software, Digital Reveal, and Figure 8 Technologies.

Thom Goolsby, a lobbyist for the sweepstakes industry group N.C. Small Business Coalition, said they are pushing state legislators to legalize the games prior to the July 1 deadline, thereby making the agreement with federal prosecutors “null and void.”

“We are encouraged by the sound decision on the part of these industry executives and the government to refrain from wasting untold resources on litigation,” said Goolsby, a former Republican state senator from Wilmington recently appointed to the University of North Carolina Board of Governors.

The Associated Press reported in 2013 that sweepstakes software provider Chase Burns of Oklahoma provided about $235,000 in checks delivered to North Carolina politicians by Moore & Van Allen, a Charlotte law and lobbying firm where Gov. Pat McCrory worked until just days before taking office in January 2013.

Burns later pleaded guilty in Florida to two criminal counts of assisting in the operation of an illegal lottery. As part his plea deal, Burns agreed to forfeit $3.5 million from bank accounts prosecutors said contained the proceeds of illegal activities. That included the same checking account used to send the donations to the North Carolina politicians. After the story broke, the campaigns of McCrory, state Senate leader Phil Berger and other top GOP leaders gave to charity the donations they received from Burns.

For the last two years, the North Carolina Board of Elections has been investigating whether the Burns checks violated state laws prohibiting corporate money from being used to “directly or indirectly” fund political campaigns.

Board spokesman Josh Lawson said last week that investigation is still active, though he could provide no indication of when the probe might be completed. As governor, McCrory appointed the five-member elections board.

Cumberland County Sheriff Earl R. “Moose” Butler, who has been aggressive in locking up sweepstakes operators in his jurisdiction, said Wednesday’s settlement announcement marks a major milestone.

“For several years, video poker machines have been masquerading as sweepstakes,” Butler said. “We hope these agreements will stop and deter evasion of North Carolina’s gambling laws. We have long been involved in this fight, and we will not stop until the laws passed by the legislature and the North Carolinians they represent are fully enforced.”

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