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StarTribune ,. ~ .. t4.,_, _ t~UNDAY/; a tem ,erg 3/1987 , .,~ ~,~: 'N~E~-WeS;P~A P.E~~ °° ~' ~ ~ ~`~' ....P ~ -,~ ~ R..='0"F' T:=}-i: E ~ ~T~VI(~ I?N.~:.C ~f~.T I.E S _' , .~ _ ~ ;, _ ~ :.:.~,._ h Charitable gambling not always for charity Copyright 1987 Star Tripune By Robert Franklin Staff Writer Minnesota's charitable gambling op- erators are spending millions of dol- lars of their net profits on their own organizations, rather than for charita- ble purposes. Much of the money is going to build, equip or remodel veterans-and frater- nal clubs. That is legal under the broad limitations of state law. Of the $386 million spent on charita- ble gambling in Minnesota last year, 78 percent was returned in prizes and another 10.5 percent went to .pay employees, rent and other expenses. That left 11.5 percent - a total of $44.4 million - to spend for "legal purposes," which may or may not be charities. "Some people say, `They're not giv- ing the money to charity,' "said Rog- er Franke, executive secretary of the Minnesota Charitable Gambling Control Board. "My answer is: They don't have to. They must spend for a lawful purpose." Franke's board does not assemble precise figures on individual organi- zations' spending for charitable and other purposes. But a Star Tribune examination of monthly reports for 26 organizations found that some clubs have been using most of their net proceeds for such expenses as mortgage payments, real estate taxes, new kitchen and bar equipment, re- pairs, landscaping, paving parking lots, janitorial- supplies, garbage col- lection, snowplowing -even back gambling taxes levied by the U.S. Internal Revenue Service. "Paving a parking lot is not charity," Franke said. "But it is a lawful pur- posc." Charitable gambling is no penny-ante afTair. The $386 million Minnesotans spent last year on pulltabs, bingo, tipboards, rafIles and paddlewheels is nearly triple the $133.7 million wa- gered at Canterbury Downs in its April-November season. State law permits such games to be operated only by veterans, fraternal, religious and. other nonprofit organi- zations. The term "charitable gam- bling" has long been used in public discussion of the wagering but. the statute uses it only in the control board's name. Otherwise, the law re- fers to "lawful gambling." The Minnesota Council of Nonpro- fits, which serves organizations that • -help the disadvantaged, is studying gambling records and may seek changes in the law to direct more of the profits to charity, said Jon Pratt, its executive director. "Most of the proceeds from charita- ble gambling should go to charity," Pratt said. "I think that should be a given." In giving certain organizations a mo- nopoly on legal gambling, he said, the law poses a public policy question: "Does that serve a public good or a private good ...There are many ac- tivities that are in no way charitable activities that are allowable expendi- tures." The state's 2,500 gambling organiza= lions have found pulltabs the biggest and fastest-growing form of gam- bling, grossing $312 million last year and returning $250 million in prizes. Pulltabs -pieces of paper with hid- d~n symbols that can be matched for prizes -will become legal in Minne- apolis this fall under an ordinance approved Friday by the City Council. Along with tipboards and paddle- whccls, they arc expected to add $10 million.to $20 million to Minnesota's gambling gross next year. State law places few restrictions on the use of profits from pulltabs and the other forms of gambling. The statute says that "lawful pur- pose" means "benefiting persons by enhancing their opportunity for reli- giaus or educational advancement, by relieving them from disease, suf- fering or distress, by contributing to their physical well-being, by assisting them in establishing themselves in life as worthy and useful citizens, or by increasing their comprehension of and devotion to the principles upon which this nation was founded." It also means public works, support- ing government activities, improving or maintaining an organization's real property and paying gambling taxes. In June 1986, for instance, Tri-City American Legion Post 513 of New Brighton donated'$25 to the Vikings Celebrity. Tournament, $325 for a .video cassette recorder for the Veter- ans Administration Hospital, $181 for the Stockyard Days civic celebra- tion and $280 fora Chamber of Commerce baseball night. During the same month the post spent $10,500 from gambling profits to blacktop its parking lot, $4,675 for air conditioning, $2,887 for landscap- ing, $1,830 for a salad bar and $3,283 for cabinets and other equipment. That was a period of heavy spending for remodeling the post's new build- ing, aformer supermarket 'on Old Hwy. 8 that now boasts a~ public restaurant and a large bar, complete with signs that list post blood donors and warn against profanity. The post donates significantly to charity in most months, Commander John Hearn said. For instance, it gave $10,000 to help pay for a liver transplant for Rita Enckson, a 22- month-old Columbia Heights girl, and $5,000 to buy bulletproof vests for police officers in New Brighton and St. Anthony. He noted that the post facilities are used by the public and require a lot of upkeep. In Bemidji, Veterans of Foreign Wars Post 1260 paid $69,000 for a building last December and spent $23,573 for such activities as youth hockey, scholarships, cancer research and transporting hospitalized veterans. The post grosses more than $200,000 in pulltab revenue and $25,000 in gambling profits most months, and had a profit carryover of $423,627 as of June 30. In Mankato, Morson Ario VFW Post 9713 made monthly mortgage pay- ments of $4,836 from gambling pro- ceeds. In one of .few instances in which it has rejected an expenditure, the gambling control office turned the club's use of $666 for installation of Morson Ario officers. The. post had justified that expense as "bene- fiting persons by enhancing their knowledge and dedication and devo- tion to principles of this nation of ours." The control board must approve ma- jorbuilding projects, and the rules do not allow organizations to use gam- bling profits for administration or personal gain, Franke said. His office had turned-.down such expenses as telephone and computer systems. A Star Tribune examination of monthly tax returns for 26 of the largest gambling organizations shows a wide variation in purpose, gam- blingactivity and spending. The Multiple Sclerosis Society appar- ently raised the most, $774,549, on a gross of $10.4, million for the seven- month period ending in June, and spent most of its profits on its own programs of patient services, public information, volunteer services and grants to other organizations. In six months, the Minnesota Thera- peutic Camp raised $327,611 for its Camp Confidence near Brainerd, selling pulltabs through 251ocations. Unlike .those organizations, St. Jo- seph's Society for Charity, Inc., puts .major effort into bingo, which re- qutres renting a hall. Six organiza- tions operated the Little Canada charity bingo hall through a collec- tive management until the control office found that to be a violation of rules requiring each organization to be responsible for its own gambling. "We never were in compliance last year," said Lois Blomberg, St. Jo- seph's full-time gambling manager. She said she didn't have complete access to the books, and semiannual rent and salary payments caused the society to lose $19,140' in December and $49,216 in June, although it net- ted $ 114,684 over the seven-month period. (The law put a cap on spending for rent, salaries and other expenses di- rectly related to gambling. They can- not exceed 55 percent of gambling revenues minus prizes for bingo, 45 percent for other games.) The hall was reorganized with five groups operating independently and "it's worked out just beautifully," said Blomberg, who added that she doesn't play bingo because "it's like watching paint dry." St. Joseph's also sells pulltabs at a nearby restaurant, a bar and. during its two bingo nights each week at the :hall. The organization donated $225,000 to Little Canada. youth sports over the last 1'h years. .:Franke of the control board touts "success stories" in a monthly news- letter sent to gambling organizations. They, have included funds -fora li- brary in Cloquet, a church building roof in Minneapolis, a weather warn- ing system and an adult day care operation in Bemidji, the City Hall in Mentor, numerous food shelves, United Ways, parks, youth recreation projects, fire department and ambu- lance improvements and bulletproof vests for police officers. Bingo has been legal in Minnesota since the 1940s and pulltabs were legalized in 1981. But the gambling was regulated - or, usually, not reg- ulated - by -local government until the control board was established in 1984. Franke said his 12-member office has gradually upgraded requirements to report how organizations are ac- -counting for and spending gambling ,funds, sometimes sending back as many as 30-percent of tax return forms for more information. He said the result has been a greater awareness of what gambling can do for nonprofit organizations as well as the departure of some people who were misusing the system. He recalls talking to one organization that reported an' increase of $25,000 in net profits on the same gross. He asked what made the difference and was told that the old bookkeeper re- tired. Staff writer Ted Jones contributed. to~ this article.