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West Virginia Lottery rule change raises safety issue

Sep 29, 2011, 10:09 am

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West Virginia Lottery

Limited video lottery retailers and machine distributors raised concerns Wednesday that a proposed West Virginia Lottery Commission rule change could put their employees at greater risk of being robbed.

The commission is attempting to clarify state Lottery law regarding how video lottery retailers — bar and club owners — and machine distributors are to split their share of video lottery profits.

As drafted, the rule change would clarify that, under state law, payments between distributors and retailers have to be by check or electronic transfer — not cash.

During Wednesday's commission meeting, several retailers and distributors said enforcing that law could cause problems — including putting employees of video lottery distributors at greater risk, since they would be carrying twice as much cash after "sweeping" machines at each video lottery location.

"Word will get out that our men are carrying thousands of dollars in cash," said Champ Kerns, operator of Viking Video and Music in Dunbar. "The reason for my concern is my son is my primary collector."

Many distributors give retailers their share of profits on site, in cash, he said. If they can't pay the retailers immediately in cash, they'll have to leave the retail site with all the cash from the machines, and then pay the retailers later.

Garrett Stanley, owner of the Alley Cat II bar in Huntington, said enforcing the prohibition on cash transactions could hurt small retailers, who are required to keep sufficient cash on hand to pay out large video lottery winnings.

"Having to wait on that check or deposit could cause a problem," said Stanley, who said it could also worsen security issues, noting that his bar has been robbed "13 or 14 times" since it installed video lottery machines.

"It's not a laughing matter to me. It really has happened," he said.

George Carenbauer, a Charleston lawyer representing the West Virginia Amusement and Limited Video Lottery Association, agreed that "there are some security concerns."

Lottery Director John Musgrave pointed out that the law prohibiting cash transactions is intended to make it easier for Lottery officials to audit payments between retailers and distributors.

Under the law, the state gets 52 percent of the profits from each video lottery machine. Retailers who "lease" their machines from distributors are to get no less than 40 percent and no more than 50 percent of the remaining share of profits.

However, Musgrave said the Lottery has received complaints from retailers who contend their distributors are deducting expenses from their share of the profits, including such costs as annual license renewal fees — and in some cases, the costs of bids to obtain the new 10-year LVL licenses. That drops them below the 40 percent minimum.

Commission chairman Ken Greear told Musgrave to schedule a public hearing on the rule change before the commission's October meeting.

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