Virginia doesn’t have licensed poker rooms. A state gambling board chairman opened one anyway.

Spat over charitable gaming prompts concerns from lawmakers about gambling oversight

By: - September 28, 2021 12:32 am

Pop’s Poker in South Richmond, a poker room attached to a sports bar and bingo hall, opened its doors to players on Sept. 9. (Ned Oliver/Virginia Mercury)

When a new Virginia law took effect last year letting charities run Texas Hold ‘Em poker tournaments, the charitable gaming industry, usually associated with fading bingo halls, was eager to get going. 

Maybe a little too eager, according to lobbyist Matt Benka, who warned state officials on behalf of the now-dissolved Virginia Charitable Poker Association in July 2020 that potentially illegal poker rooms were popping up before the state had approved any regulations or permits.

Things haven’t gotten smoother since. As Virginia pushes further into legalized gambling, the failed rollout of charitable poker over the past year is a stark example of inventive gambling interests — at times writing their own rules — moving too fast for lawmakers and regulators to keep up.

There are still no poker regulations or permits, partly out of growing concern among legislators about whether the state is capable of effective oversight of charitable gaming.

The lack of permits hasn’t stopped Chuck Lessin, the chairman of the state’s Charitable Gaming Board, from opening a poker room, Pop’s Poker, at his Richmond bingo hall and sports bar. Lessin has also started a for-profit poker operations company other charities can hire to run their games.

Last year, he and other board members clashed with state regulators over how strict the rules for poker should be, disregarding a recommendation for safeguards to prevent the same person from profiting off poker games while controlling the charity required to use at least 2.5 percent of the proceeds for charitable purposes.

After Benka’s warning, Lessin told officials at the Virginia Department of Agriculture and Consumer Services, which oversees charitable gaming along with the board, the emergence of unregulated and unlicensed poker was a reason to start giving out permits as soon as possible instead of insisting the industry play by the rules and wait.

“We are all aware many charities are ignoring that request,” Lessin wrote to VDACS officials in an August 2020 email. “The path of least resistance here is to simply be ready and license the charities and operators at the earliest opportunity.”

When things didn’t go as Lessin planned, he accused agency officials of undermining his board’s authority and sabotaging the poker rollout by slowing down the enactment of the regulations. Then he sued them.

The poker controversy is part of a broader battle playing out in the little-understood world of charitable gaming — Virginia’s first form of legalized gambling — as it fights to protect its turf against newly legalized slots parlors, casinos and sports betting apps. The dispute involves two state-ordered reviews of how the industry works, at least one lawsuit and the unusual dynamic of a state board’s leadership strikingly at odds with its agency partners.

The board’s vice-chair, Amy Solares, also appears to have a stake in a Virginia Beach bingo hall that has been advertising poker events for more than a year. That facility, the Bingo Palace/Beach Poker Room, was one Benka flagged for officials in July 2020 as hosting poker without a permit. In an email to VDACS a month later, Lessin seemed to validate Benka’s claim, saying: “Amy e mailed me today informing me that she is ceasing the activities of the charity hosting poker in her facility.” The Beach Poker Room continues to promote poker events on its Facebook page.

Neither Solares nor her lawyer responded to the Mercury’s inquiries about her connection to the facility. Solares’s 2019 financial disclosure, required of all state board members, listed “Independence Associates t/a Bingo Palace” as a business interest. Her most recent disclosure is blank.

Lessin is a legislative appointee to the Charitable Gaming Board. He was last reappointed in 2019 by former House Speaker Kirk Cox, R-Colonial Heights. Solares is an appointee of Gov. Ralph Northam.

‘Everything’s out the window’

By the 2021 legislative session, the General Assembly had seen enough to try to freeze the implementation of charitable poker until 2022 through an amendment to the state budget. The Charitable Gaming Board signed off on final poker regulations at the end of 2020, but the legislature’s action nullified those rules. In response, VDACS told applicants in May the agency could no longer issue poker permits.

That prompted Lessin’s lawsuit, which argued the agency should have given his charity a poker permit because the regulations had taken effect before legislators stopped them.

A Richmond judge disagreed, faulting the agency for not fully processing Lessin’s application but concluding no one has an inherent right to a state-issued poker permit. That ruling came in August.

Undeterred, Lessin opened Pop’s Poker in early September, where games are held from 2 p.m. to 2 a.m. Thursdays through Sundays. They take place at the same South Richmond address where Lessin and other board members held official business meetings last year to write the poker rules.

Top players at Pop’s Poker can spend around 10 hours per day at the tables, according to leaderboards posted online. (Ned Oliver/Virginia Mercury)

In an interview, Lessin said he’s running his new venture as if the regulations were in place. But he doesn’t plan to file disclosure reports with VDACS. If he did, he says, the agency probably wouldn’t accept them.

Lessin argues that because legislators passed a law allowing charitable poker with regulations coming later, that by itself made charitable poker legal as of July 2020. If legislators wanted everyone to wait for the regulations, he said, they could have made that clear in the bill. But it wasn’t.

“I waited, and I didn’t want to do it,” Lessin said. “Now, in my opinion, everything’s out the window.”

Chuck Lessin, the chairman of Virginia’s Charitable Gaming Board, has been involved in bingo for decades. (Photo by Graham Moomaw)

The tumultuous beginning of charitable poker in Virginia may have gone largely unnoticed because some see little harm in people playing cards for money when they’ll be able to do it at casinos soon anyway. But some policymakers see it as a stunning failure of good-government principles, one that warrants a serious reevaluation of the state’s fragmented gambling laws and how they’re enforced.

Sen. Bryce Reeves, R-Spotsylvania, an ex-cop who began sounding the alarm about overreaches by the charitable gaming industry after seeing slots-like bingo machines in places they shouldn’t be, said he wants to stop what he sees as obvious self-dealing.

“If people get locked up because of that, then shame on them,” said Reeves, who’s serving on a joint legislative subcommittee studying charitable gaming.

Del. Paul Krizek, D-Fairfax, the subcommittee’s chairman, said pausing poker was meant to allow a fresh look at how the industry is regulated. The poker rooms opening up despite the freeze, he said, cut against that effort.

“I think we made it pretty clear that everything is frozen with respect to opening new ways to do charitable gaming until we are finished with this process,” Krizek said. “If it’s not against the law, it certainly would be against the spirit of what the General Assembly has asked that we do.”

The Office of the Inspector General, the state’s watchdog agency, was also instructed to look into charitable gaming. Its report is due Oct. 1.

‘The whole thing is upside down’

In addition to poker, officials are examining whether legally questionable charitable gaming machines are filling the void created by the ban on skill machines that took effect in July.

Legislators are also concerned about the possibility of regulatory gaps arising from exemptions for charitable organizations’ “private social quarters,” or club-like spaces only open to members and invited guests. 

Electronic bingo games, which resemble slot machines but work a little differently, played in private social quarters aren’t subject to the same reporting and audit requirements as regular bingo sessions. According to VDACS data, the profitability of those machines, first authorized in 2007, has surpassed old-fashioned bingo. In 2019, before the numbers fell significantly due to the COVID-19 pandemic, charitable organizations reported almost $250 million in gross gaming receipts, with $26.6 million going to charitable purposes. That year, the machine manufacturers reported $964 million flowing through their games, an indication most machines fall under the social quarters exemption. Charitable gaming proponents have said most of that money goes back to players in prizes, making net proceeds smaller than the totals might suggest.

A patron at Pop’s Bar and Grill plays a slots-like charitable gaming machine, which are described in state law as “electronic pull-tab” devices. (Ned Oliver/Virginia Mercury)

Just like bingo, electronic bingo and raffles, it was understood that some poker proceeds would be dedicated to the charitable activities of the nonprofit or tax-exempt group involved, which could include VFW or American Legion posts, fraternal lodges, religious organizations, volunteer fire departments and police groups, school booster clubs and more amorphous social welfare groups. The prospect of state-sanctioned poker rooms also meant money-making opportunities for people lined up to run or host the games.

In Lessin’s telling, a state now flooded with gambling interests and their lobbyists is unfairly casting a pall over the one gambling sector meant for social good, taking a harder line against charities than for-profit companies. Charitable bingo halls and poker rooms, he says, present competition for bigger commercial players. And that has made them a target.

“I think the whole thing is upside down,” Lessin said.

Lessin has at least one lawmaker in his corner. Sen. Chap Petersen, D-Fairfax, who sponsored the Texas Hold ‘Em legislation in 2020, is representing Lessin in his lawsuit against VDACS. Petersen’s law firm is being paid for the work. The senator, who abstained from poker-related votes in the 2021 session, said he wants to ensure charities aren’t “treated as an afterthought” as gambling grows.

“The idea was to expand charitable gaming and to keep the charities economically robust,” Petersen said.

‘It will come at a price’

As the sponsor of the poker bill, Petersen had control over its wording and the legal vagaries that resulted. He said he couldn’t comment extensively on the matter due to his role in the litigation.

Prior to the lawsuit, Petersen filed a public-records request with VDACS for poker-related documents. The Virginia Mercury obtained the same records from the agency, which claimed some of the records Petersen requested were fully exempt from the Freedom of Information Act and made extensive redactions to other documents.

Envisioned as a way to allow a little social gambling for good causes, Virginia first allowed bingo in 1973, when no other gambling, not even the Virginia Lottery, existed. It initially fell under the purview of local governments but oversight shifted to the state “largely as a result of local bingo scandals and criminal prosecutions in the early 1990s,” according to a state report published in 2003.

Lessin, a homebuilder, has been involved in charity bingo for almost four decades, a side venture he said arose from his advocacy for Richmond’s Jewish community. One of his charities, The Jerusalem Connection, which says its mission is to “inform, educate and activate support for Israel and the Jewish people,” owns the South Richmond property where the bingo and poker operations are located, according to city property records. Another of his charities, Cheers, which has a more general focus on community welfare in Richmond, applied for the poker permit.

Lessin said he spent years pushing for charitable poker, faced with declining bingo revenues and the state’s softening anti-casino stance.

“I think we sort of carry the moral high ground here,” Lessin said.

The charitable poker bill passed overwhelmingly in 2020, adding charity poker tournaments to the activities allowed for licensed charitable gaming organizations. Though the law clearly envisioned a system of regulations and permits for poker, it doesn’t clearly specify that poker play can’t begin until that oversight is in place.

When the law took effect, Lessin and his board wanted to move fast on the regulations. But there were differing opinions over who should take first crack at writing them. 

Emails show VDACS officials were prepared to draft regulations and present them to the board, a fairly typical process for technical, industry-specific regulations. But the board wanted to write the regulations itself, putting industry members in a leading role with regulators assisting. That setup led to VDACS being pressured to rush the process and implement regulations the agency saw as inadequate and problematic, possibly to the point of conflicting with state law.

“Obviously, they have the authority to take the action as they did, but it will come at a price,” Mike Menafee, a VDACS official who manages charitable and regulatory programs within the consumer protection division, said in an August 2020 email to a colleague about problems with the proposed regulations.

VDACS objected to language empowering the board to adjudicate poker complaints, authority the agency said properly rests with regulators and prosecutors. That language was removed.

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Another point of contention was whether the rules should include safeguards to prevent any one person or group from being paid to run the poker games while simultaneously running the charity getting a cut and acting as the landlord collecting rent on the building. Rules against that mixing of interests are in place for bingo to prevent creative accounting and self-negotiating that could maximize profits while minimizing the amount left over for charity. That provision was absent from the board’s draft poker regulations.

Menafee noted its omission could allow money to flow “unchecked” between charitable and for-profit entities controlled by the same person or people. In agency editing notes attached to the draft regulations, Menafee wrote that the board appeared to be signaling that that type of arrangement was fine as long as it was disclosed.

“The state took regulatory oversight away from the localities due to the abuses and the intertwining of these interests,” Menafee wrote. “The board should consider separating these interests to avoid a historical repeat.”

‘The fox guarding the chicken coop’

The board disregarded Menafee’s advice. The end result, the agency wrote in a regulatory background memo, “further weakens provisions of the regulations intended to prevent conflicts of interest.”

As the regulations were revised over more than a dozen meetings in the second half of 2020, the board looked favorably on public comments from a man named Rich Lehman, who, among other things, suggested weakening a provision requiring a representative of the charity to be physically present for poker games and scrapping a rule preventing people who run charities or their family members from playing in that charity’s tournaments. The board accepted both suggestions. Lehman now works for Lessin as director of operations for Pop’s Poker.

Lessin said that relationship wasn’t disclosed because he hadn’t initially expected to start a poker operations company and didn’t have a business tie to Lehman at the time.

“If anything at that point he just was somebody who explained to the board chairman how poker works,” Lessin said. “I didn’t know that he was going to end up working with me.”

However, in a YouTube interview with a channel called True Poker Dealer, Lehman indicated his involvement with Lessin started in May, before the regulation writing had begun.

Unlike bingo sessions, which can be run by volunteers, charitable poker requires trained dealers. The push for charitable poker would fall apart, Lessin said, if there were no poker operators Virginia charities could turn to for help getting games running.

“I really, truthfully, just wanted to see the charity play poker,” Lessin said. “I don’t have the time to run yet another company.”

Pop’s Bar and Grill in South Richmond. (Ned Oliver/Virginia Mercury)

Lessin and his son registered Pop’s Poker LLC in August of 2020, according to State Corporation Commission records, months before the board took its final vote on the poker regulations last December.

At a board meeting in September 2020, Lessin entered a disclosure statement into the record, noting his personal interest while declaring he could perform his duties “fairly, objectively and in the public interest.”

“I anticipate that I will be one of many potential Texas Hold’em poker operators throughout the state,” Lessin’s statement read. “This company owned by myself and my son may service a charity with which I am involved as well as other charities.” 

Krizek sees the situation as untenable.

“The folks being regulated are the ones who are making the regulations. That’s kind of the fox guarding the chicken coop,” Krizek said. “Even the most ethical members of a board like that are challenged no matter what just because they can’t recuse themselves enough.”

‘You want to shoot me for trying to be clever?’

Although charitable poker is currently happening without oversight, Lessin said the initial activity at Pop’s Poker is expected to benefit another religious charity that once operated sleepover camps in Virginia for Jewish boys. Lessin said he’s not currently involved with the charity and it “ran out of gas” some time ago.

“One of the thoughts is to raise the money to get it going again or to donate it to other causes that are within our scope of operation,” Lessin said.

Strict firewalls separating entities involved in charitable poker, Lessin said, are unnecessary.

“The casino people are going to come in. They’re going to have their investors. They’re going to build the building. They’re going to own it. And they’re going to run the games, et cetera,” Lessin said. “Let’s just set up Texas Hold ‘Em like that.”

An overly commercial, casino-like charitable gaming industry is exactly what some lawmakers want to avoid, partly because the charitable element means it’s not taxed like regular gambling.

“How can we make sure this is about charity first? And not gaming first?”Krizek said at a committee meeting this summer. “The gaming is supposed to just raise the money for the charity to do the charitable stuff.”

The poker regulations specified that a charitable organization must dedicate at least 2.5 percent of its gross poker receipts for charitable purposes. But the regulations allowed some of that charitable percentage, 0.25 percent, to be paid to the operator contracted to run the games. More broadly, the approved regulations allowed up to 50 percent of the net proceeds, the money remaining after prizes are paid out, to go to the poker operator hired by the charity.

As the regulations were being hashed out, another disagreement emerged over whether the General Assembly had only legalized poker tournaments or if the law could be interpreted to allow more lucrative cash games. In tournament play, everyone buys in for the same amount, players eventually drop out as they lose their chips, and the event has a clear ending with known winners. In cash games, players can come and go as they please and can continue buying in if they lose their chips, allowing more continuous, free-flowing play as opposed to the more finite schedules of tournaments.

Officials at VDACS advised the board they didn’t think cash games were permissible under a law that only mentioned tournaments. Lessin and others felt they were. Or should be.

“If I go play and I’m in there for 45 minutes and my wife says ‘Get your butt home,’ then I’ve got to leave right?,” Lessin said. “No one thought you had to go for a six-hour event.”

Tad Berman, a Richmond nightclub bouncer and a regular at meetings on Virginia gambling issues, told legislators the board was distorting the meaning of the bill for its own ends.

“They came up with an off-the-wall definition of what a tournament is,” Berman said while testifying to the legislative committee this summer. “It’s not even close. I realized at that time that something was wrong.”

For now, the dispute over cash games versus tournaments appears moot. Pop’s Poker is running what it calls live-action tournaments, a format that gives players more flexibility for continuous play by tracking how much time they spend sitting at the tables and comparing it to other players. Winners are determined based on their seated time in a given day, and the prizes are credits that can be used on food, drinks or buy-in fees for future tournaments. According to results posted online, top finishers typically spend about 10 hours playing per day.

“You want to shoot me for trying to be clever and figuring out how to make the charities more money?” Lessin said. “Shoot me.”

‘There is no statewide charitable poker program’

Lessin said he and his attorneys are confident they’re on solid legal ground.

Asked whether any charitable poker should be happening in Virginia, VDACS spokesman Michael Wallace said in an email “this is the subject of a current lawsuit and more of a legal/local law enforcement question.”

“However, currently, there is no statewide charitable poker program,” Wallace said.

VDACS has indicated it has little to no authority to root out illegal gambling as a regulatory agency with a narrow focus on charity. Though the agency can revoke gaming permits and occasionally refers violations to law enforcement, the Virginia State Police and local prosecutors have told the legislature illegal gambling isn’t a major part of their workload.

One possible outcome is the state consolidating all gambling regulation, currently spread among the Charitable Gaming Board, the Virginia Lottery Board and the Virginia Racing Commission under a new state board providing more comprehensive oversight. It could include representatives from all the various gambling sectors, but wouldn’t leave niche industries like charitable gaming or horse racing to largely regulate themselves. Before skill machines were banned, they were overseen by the Virginia Alcoholic Beverage Control Authority because most were in convenience stores and restaurants with alcohol licenses.

Beefing up enforcement may also be a part of that effort.

“With casinos coming online I think we’re going to need to have some really good expert law enforcement folks that can identify illegal gaming,” Krizek said.

Lessin acknowledged there may be some bad actors in charitable gaming. But he says he’s not one of them, and he’s not the only one with a conflict.

“I am confident that I did not go off track,” he said. “I understand the perception. I get it. But again, asking me to not do that would be like saying to every one of the elected officials, you can’t take any more political contributions from any company or any person that you have anything to do with on any bill. They wouldn’t be able to vote on anything.”

After restricting the Charitable Gaming Board’s ability to implement new regulations until 2022, the General Assembly will have a chance to revisit the issue early next year. At a meeting in May, a representative from Attorney General Mark Herring’s office told the board the poker regulations were in “limbo,” and the only way to change that was to convince the legislature to change its mind.

Though Herring’s staff advised both VDACS and the Charitable Gaming Board during the poker dispute, his office says gambling enforcement is a local matter and is leaving it to others to sort out the legal confusion.

“If there is a consensus among stakeholders that there needs to be clarification, the General Assembly would be responsible for making those changes,” said Herring spokeswoman Charlotte Gomer. Though charitable gaming officials discussed asking the attorney general for a formal opinion on the poker law, no such opinion was issued.

As for VDACS, the agency is still dealing with Lessin’s lawsuit, which he is pursuing on appeal, and seems to be taking a hands-off approach to all things poker.

In an email last October, Larry Nichols, director of the agency’s consumer protection division, thanked his colleagues for all the hours spent on the cause. He seemed to have mixed feelings on whether it was a worthy one.

“We have put a lot of time and energy into this and those who will benefit will have no clue….but we need to remember that this is all for the charities,” Nichols said, adding four smiley-face emojis. “All 2.5%.”

Correction: An earlier version of this story misstated who appointed Lessin to the Charitable Gaming Board. 

 

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Graham Moomaw
Graham Moomaw

A veteran Virginia politics reporter, Graham grew up in Hillsville and Lynchburg, graduating from James Madison University and earning a master's degree in journalism from the University of Maryland. Before joining the Mercury in 2019, he spent six years at the Richmond Times-Dispatch, most of that time covering the governor's office, the General Assembly and state politics. He also covered city hall and politics at The Daily Progress in Charlottesville. Contact him at [email protected]

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