COLUMBUS — Most Ohio Internet cafes provided incomplete information to the state and most of the businesses’ operators who can be identified have spotty financial backgrounds or criminal histories, a newspaper investigation has found.
The report Sunday in the Columbus Dispatch comes as state lawmakers continue to debate whether to regulate or outlaw the sweepstakes gambling operations.
The newspaper’s review found more than half the 780 businesses registered with Ohio Attorney General Mike DeWine provided only a street address, leaving large sections of a state form empty.
North Ridgeville Mayor G. David Gillock, a board member with the Ohio Free Enterprise Alliance that supports the cafes, characterized the investigation’s findings as “good reasons as to why we need regulation of these businesses.”
North Ridgeville has imposed local regulations on the six Internet cafes in the city of 30,000. Licensing requirements include complete criminal and financial background checks of owners, a plan of operation and a health-and-safety plan.
The businesses also pay the city an annual $5,000 registration fee, plus $30 per month for each computer used for game play. North Ridgeville has collected about $110,000 from the cafes in each of the past two years, not including income taxes.
Local police have investigated only two minor regulatory incidents.
Almost 100 aren’t on file with the Ohio Secretary of State, and incorporation records for another 444 of the cafes couldn’t be located because not enough information was provided.
Through the investigation, state business records for just 235 of the cafes could be found.
Of 221 individual operators, only 122 provided enough information to be positively identified by the newspaper. In several cases, a national public records search by the newspaper turned up no one in the United States with the name provided.
Of the 122 identified owners, almost six in 10 had spotty financial histories, including federal and local tax liens and bankruptcies.
A dozen had criminal backgrounds sufficient to bar them from casino employment under Ohio law. Charges included theft, gambling, drug trafficking and assault.
The review found that identified owners collectively had 10 federal tax liens, 28 state tax liens and 50 civil judgments for unpaid debts. Their public records trails also included 25 bankruptcy cases and eight foreclosures.
DeWine said his office’s review of the industry has made similar findings.
“It’s like the Wild, Wild West with these places, and what (this) investigation shows is consistent with what we have found and have been saying for two years,” he said. “The Legislature needs to take control of the situation because status quo is unacceptable.”
Customers at the cafes buy Internet time or phone cards that include codes that can lead to winning cash prizes. They play slots-like games on computers to reveal their winnings. Most cafes are in strip-mall storefronts.
Sandy Theis, a spokeswoman for Citizens Against Gambling Expansion, said the report “paints a troubling picture of an industry that happily invites corruption.”
“Unless our lawmakers want a casino on every street corner — and no clue who owns or operates many of them — they must move quickly to regulate Internet cafes,” she said in a statement.
“We just don’t have a problem with them,” Gillock said. “They are providing jobs and filling buildings that were empty.”
State Rep. Jay Hottinger, a Newark Republican, said the sketchy document trail and questionable backgrounds of the cafe owners make it “hard to consider this a legitimate industry.”
“How can they not all be registered properly and disclose full information relating to how they operate?” he said. “I don’t think it’s in the best interests of Ohioans’ financial health to have these places operating like this.”
State Rep. Michael Stinziano, a Columbus Democrat, said it’s time to regulate.
“Those that are following the rules will be fine, and those that are not will need to leave Ohio, and I am comfortable with that,” he said.
DeWine said he supports a bill sponsored by state Rep. Matt Huffman, a Lima Republican, that would limit prize payouts at the sweepstakes parlors to $10 a day, a provision essentially intended to drive them out of business.
The attorney general’s office lacks the legal authority to force cafes to provide more information as well as the regulatory authority to conduct thorough investigations, he said.