SalemNews.com, Salem, MA

June 25, 2013

Warrants detail probe into arcade

FBI expert: Lucky 7 games do not involve any skill

BY JULIE MANGANIS
STAFF WRITER

---- — DANVERS — The owners of the Lucky 7 arcade inside the Liberty Tree Mall and in Gloucester insist that the game machines inside their businesses were perfectly legal because they involved “skill,” not chance, and did not pay winnings in cash, but in gift cards.

But an FBI expert familiar with the devices concluded that the games, “eight-liner slot machines,” involve no skill and are programmed to prevent the customer from altering the odds through any action, including pushing the “stop” button, according to an affidavit filed by investigators.

The affidavit, filed in support of search warrants for the two businesses, details a six-month investigation by state troopers working for the Attorney General’s office and the conclusions of FBI forensic examiner Deneen Hernandez. Copies of the warrants for the Danvers location, as well as for a credit union account held by the owners, were obtained yesterday by The Salem News.

So far, no charges have been filed against owners Sam and Rosalie Parisi of Gloucester. Brad Puffer, a spokesman for the AG, said he could not comment on the status of the investigation at this point.

The warrant applications contain details of undercover visits by troopers, who made their first visit to the Danvers arcade in January.

Based on what they found, Hernandez told them that it is impossible for a customer to increase his or her odds of winning by stopping the electronic “reels” on the game, as suggested by some Lucky 7 employees to undercover officers.

Instead, Hernandez said, when a customer presses the button to stop the machine, the machines will, after a brief delay, stop, but they are programmed to prevent the outcome from being altered by the player’s actions.

“Ms. Hernandez stated that there is no customer skill involved in determining the results and explained that game odds/payout percentage can be set on each machine’s mother board by configuring ... switches,” wrote trooper Jose Cuervas, an investigator in the case.

But even if the games did involve skill, investigators suggested, they would still be illegal under another provision of the state gambling law that prohibits the use of such machines for games that provide cash, merchandise or other items of value.

The raids at both the Danvers and Gloucester locations on June 11 led to the shutdown of the arcades.

According to the search warrant “return,” a list of items seized included more than $5,000 in cash, a gaming machine, computers and an external hard drive, numerous circuit boards for the machines, receipts, a credit card reader and financial documents.

They also seized four gift cards, which had been used as “prizes” for winners.

Cuevas, the lead investigator in the case, and another trooper, Sgt. Steve Fennessy, conducted undercover surveillance at the Danvers arcade for the first time on Jan. 30.

Cuevas went into the business and noticed about 40 computer terminals along the walls of the room.

In the center was a customer service station, where two employees were working.

“How can I play the games?” Cuevas asked. The male asked him to fill out a card with information but did not ask for any identification. Cuevas, using a fake identity, filled out the card and was given a white “access card” that had a computer chip on it.

For $20, the trooper was given 2500 points. It was a Wednesday, so he received a “bonus” 500 points, he noted.

The games at each kiosk had eight columns with things like fruits, numbers or other objects, the trooper noted.

The troopers noted that the manufacturers of the games were names that were familiar to gambling regulators and that the same types of machines were used in casinos.

Players would have to accumulate at least 2,500 points from winning games on the machines to collect any “prizes,” which were gift cards to nearby businesses. Cuevas noted that none of the 15 people playing at 6:30 p.m. had cashed in for any prizes while he was there.

The following month, the investigators conducted a similar visit to the Gloucester arcade.

On the afternoon of May 8, the investigators were back in Danvers, where two troopers entered separately, as if to play the games.

One trooper asked the employees how to play the games and “How is this legit?”

An employee told him that it was fine because the games were “games of skill” and the winnings were not paid in cash.

“Does anyone ever win?” the trooper asked. He was told that someone had “recently” won $1,200.

The trooper also spoke to a woman playing one of the games, who said she had won $190. “You’re not going to get rich, but it’s a way to pass the time,” she told the trooper, according to the affidavit.

As Cuevas played a game on one machine, the other trooper returned to the employee and again asked how the games were not considered gambling. The employee said he pays out at least $1,000 a week to players, all in gift cards.

The troopers then headed to Gloucester and used the machines there the same day.

The troopers were allowed to “wager” anywhere from 10 to 250 points per play, the equivalent of 10 cents to $2.50.

The troopers then discussed their findings with Hernandez, who has worked for the FBI for the past decade; prior to that, she worked for the National Indian Gaming Commission and the New York State Racing and Wagering Board.

The search warrant was issued by Suffolk Superior Court Judge Carol Ball on the day of the raids.

Courts reporter Julie Manganis can be reached at 978-338-2521, via email at jmanganis@salemnews.com or on Twitter @SNJulieManganis.